Hi. When asking clients if they have any non taxable trusts which require registering on the TRS by 1 September, we are finding out about all sorts of trusts.
Clients have told us about bare trusts which have been created a few years ago following the advice of IFAs / investment managers. These typically have been created with £100k by a grandparent for the grandchild and hold a portfolio of shares / unit trusts. Income and gains are below personal allowances and the CGT annual exemption and so there are no tax implications for the grandchild.
We are registering them as non t/p on the TRS, but given that the funds are invested in a managed portfolio I am wondering if this would be caught by FATCA and need to be registered with the IRS.
If so this should have been done years ago.
Does anyone have any thoughts about whether a FATCA registration should be done too?
FATCA impacts on any of the Controlling Persons within a trust if they are classified as US citizens (regardless of where they live), or when they have US citizenship or a US passport. But also includes those with a US birthplace, US residential address, etc.
Controlling persons are the settlor, trustees, protectors, and named beneficiaries.
A trust doesn’t need to register if it owns only insurance policies, bonds, unit trusts or other retail products, or if it owns only shares in an unquoted company or companies, or if it owns an investment portfolio but this is managed by the trustees, not by a professional manager with discretionary power
e) it owns an investment portfolio and a professional manager has discretionary power over part of that
portfolio, but that part amounts to less than 50% of the trust’s income.
If FATCA does apply, the trust reports to HMRC rather than direct to IRS, then HMRC forward the information to IRS. However the trust still has to register with the IRS.
I agree with what Francesca has said above, but be aware that Forms W-8BEN and W8-BEN-E may also have to be filed. These are not filed with the IRS but with the persons / companies administering the underlying USA assets.
Form W-8BEN-E is a minefield to complete, and all you can do is your best to be accurate as there are conflicting opinions as to how the Form should be completed.
Form W-8BEN is simple one page form to be completed.
Yours sincerely,
Peter Double / Probate Resealing Services