Trustees across the UK are currently rushing to register their trusts on HMRC’s Automatic Exchange of Information (AEOI) system to meet the strict 31 December deadline. Previously, reporting was only required when there was a foreign connection with the trust, such as a payment to a beneficiary beyond the UK. The new wider registration and reporting system marks a significant new administrative change.
With threats of fines and penalties for non-compliance, all trustees that hold financial assets, such as investment portfolios or bank accounts which are professionally managed, should take legal advice as soon as possible. Thorntons trust experts will be on hand to support with advice and guidance ahead of the 31 December deadline.
What is AEOI?
The AEOI system is an international framework designed to improve tax transparency between different countries and reduce opportunities for tax avoidance and evasion. It includes the United States Foreign Account Tax Compliance Act (FACTA) and the Common Reporting Standard (CRS) – a global framework developed by the Organisation for Economic Co-operation and Development
Financial Institutions including banks, building societies and certain investment entities, including some trusts, will need to collect and report required information to their local tax authority, which can then exchange it with other participating jurisdictions.
AEOI applies where a financial institution is resident in the UK, or where any part of a non-resident financial institution is located in the UK.
When does a trust need to register?
You need to register for AEOI by 31 December 2025 if you are:
• a Reporting Financial Institution
• a Trustee-Documented Trust
Which trusts does it apply to?
To determine whether your trust needs to register, and whether it needs to make a report, you need to look at the type of trust, and the assets that it holds.
Trustees must consider:
• A trust can be a “Reporting Financial Institution” on the basis it is an investment entity. A trust is therefore reportable where its gross income is primarily attributable to investing, reinvesting or trading in financial assets, and which is managed by another Financial Institution, like a fund managed by an investment manager.
• Most corporate trustee companies will be classed as Financial Institutions.
• A “Trustee-Documented Trust” is a trust that is a Financial Institution, where one of the trustees of the trust itself is a ‘Reporting Financial Institution’ such as a corporate trustee company.
If these definitions apply, your trust will need to register, even if they do not need to make a report in the future.
Enhanced due diligence requirements
Where a trust is classified as a Financial Institution, trustees must now keep a record of the steps taken to comply with the due diligence rules. Going forward self-certification forms will need to be obtained from the settlors, trustees and certain beneficiaries.
Our advice
If you are a trustee, we would advise you to speak to your professional advisers as soon as possible. The updated rules are complex, the deadline is fixed, and the consequences of non-compliance can be costly. Taking action now will ensure that your trust remains fully compliant in this new era of wider mandatory information sharing.
Our trust team are here to assist with any advice on your obligations to remain compliant with these new regulations. If you would like to discuss your trust, please contact aThorntons on 03330 430350.
