HMRC Automatic Exchange of Information - new trust registration requirement

Trusts Discussion
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Many thanks for the reply Andrew. Yes, just thinking about AEOI here. So on that basis, if there is a law firm trust corporation trustee and the trust just hold bonds and produces no income at all, or had only rental income, you think registration would still be required? This vastly increases the scope and it’s hard to see the rationale behind it where there is no income at all.

We had been wondering from the STEP guidance if it was only if the trust is itself a FI (having passed BOTH (STEP wording) the ‘assets test’ and the ‘managed test’ to be an ‘investment entity’. Then only if the trust is itself a FI (STEP wording ‘a trust that is a FI will be’…) either a RFI or a NRFI as a TDT. It then goes on the say that a TDT is a ‘trust that it a FI’ (ie trust must FIRST be a FI itself) where the trustees of the trust is itself a reporting financial institution and reports the information required in respect of the reportable accounts of the trust’ (presumably no reports if no income) and explains how prior to this change a TDT did not have to register but now it does.

The ATT note Urgent 31 December 2025 registration deadline for some trusts and companies (updated) | The Association of Taxation Technicians says “ A trust with investment income could alternatively be a Trustee-Documented Trust. Again this requires more than 50% of the trust’s income to come from investments, but here one of the trustees is a FI itself, typically a corporate trustee. Where the corporate trustee has agreed to take on reporting responsibilities for the trust, it is not considered a reporting FIs under FATCA or CRS. However these trusts are also required to register with HMRC by 31 December 2025. (emphasis added). This also implies that the investment income requirement must be met where there is a trust corporation trustee.

The examples at IEIM400780 - Investment Entity: Examples - HMRC internal manual - GOV.UK includes the below but the 50% investment test is met. What would be useful if to also have a list of those that don’t have to register!

Family trust with a corporate trustee

The ABC family trust’s gross income is primarily attributable to investing, reinvesting or trading in financial assets. The trust was set up on the advice of a law firm and that firm’s own corporate trustee is the trustee of the trust. The corporate trustee acts for the law firm’s clients without itself charging any fees to the clients. Even though the corporate trustee does not charge, it is a Financial Institution by virtue of being an Investment Entity. Its Related Entity (the law firm) is charging the clients for the corporate trustee’s services of managing assets, the corporate trustee therefore primarily conducts as a business, for or on behalf of a customer, the prescribed activities. This in turn means that the ABC family trust is also an Investment Entity.

What do you think, I would ideally like to find exact confirmation within the manuals/ legislation but finding them and the terminology very hard going! It would be good to confirm how others are treating this.

Many thanks

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As @BethC notes, where do we stand on the definition of ‘income’ for trusts holding only an investment bond where the underlying assets are managed by a Discretionary Investment Manager. These produce no reportable income, as interest/dividends roll up within the bond, and income would only be declared to HMRC if a Chargeable Event triggered a Chargeable Gain. Do these need registering?

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There’s a wider and a narrower point here.

  • The wider point is that whether something pays tax or needs to make tax returns isn’t any part of the definition of an FI. If you’re looking for a broad principle to guide you, then (i) good luck with that (because I’ve never found one); and (ii) taxability definitely isn’t it.
  • The narrower point (again if I recall the FATCA guidance correctly) is that it does NOT count as discretionary fund management if you buy a collective investment like a unit trust or an investment bond which itself has a discretionary fund manager managing it.
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Thanks Andrew, did you have any further thoughts on the position of the trust with the trust corporation Trustee where there is not 50% investment income in light of the STEP and ATT articles (which to me seem to suggest that registration requirements are not met) or do you interpret this differently (either the articles or from elsewhere)? Many thanks

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After spending the majority of the “Christmas break” dealing with AEOI registrations for our trust clients I am now turning my attention to the next point (or writing my post 31 January to do list!)

What are people doing in respect of advising clients around their obligations around obtaining self certification from trustees (who they are as these are trusts where we are tax adviser only, no professional trustees in place) settlors and beneficiaries and notifying all parties that their data may be exchanged internationally. Points 3 and 4 from the ATT 15 December publication.

Trustees have four actions to complete:

  1. Confirm if they meet the definition of a Financial Institution.

  2. Register with HMRC for AEOI by 31 December 2025 (or 31 Januaryfollowing the end of the calendar year they first meet the definition)

  3. Obtain self-certification from settlor, trustees and beneficiaries to confirm their residence details.

  4. Notify all parties that their data will be reported to HMRC and may be exchanged internationally.

Is it the case that this information is already held on the TRS and we already advise the trustees to notify of any changes to settlors/beneficiaries/trustees? Or do we need to be advising our clients to take further steps?

Has anyone see any guidance on this?