Non-UK Trusts

The TRS was introduced in 2017 with the aim of preventing the misuse of trusts. The TRS records the beneficial ownership of assets held in trust. So, if the trustee legally owns an asset, there is a separate record of who benefits from the assets. If registrable, trustees must provide information to the TRS regarding:

• settlors, trustees, beneficiaries, protectors, and
• assets held, such as money, buildings and land, company shares, partnerships, yachts, cars, jewellery, art, etc.A non-UK trust only registers with the TRS if:

• • it acquires, directly or indirectly, UK land and buildings, unless it’s a co-ownership express trust or
  • is liable for taxes relating to UK assets or UK-sourced income (income, capital gains, inheritance, stamp duty reserve tax, stamp duty land tax) or
  • at least one trustee is UK-resident and trust enters a relationship with UK relevant persons See ,Read here. A non-resident trust is usually a trust when

1. 1. 1. none of the trustees are resident in the UK for tax purposes, or
      2. only some of the trustees are resident in the UK and the settlor of the trust was one of the following:

• • • not resident or not normally resident when the trust was set up or funds were added
    • not domiciled or deemed domicile in the UK when the trust was set up or funds were added

Money Laundering and Terrorist Financing (Amendment) Regulation 2020 Part II Beneficial Ownership.

Business, professional, or commercial relationship.

Financial Institutions, Credit institutions, Auditors, Insolvency Practitioners, External Accountants, Tax Advisers, Legal Professionals, Trust or Company Service Providers, Estate Agents, High Value Dealers, Casinos, Art Market Participators, Cryptoasset Exchange Providers, Custodian Wallet Providers

Non-UK trusts do not register with HMRC for tax unless the trustee is liable to pay taxes on UK assets or UK-sourced income:

• Income
• capital gains
• Inheritance
• stamp duty reserve tax
• stamp duty land tax

• A person with significant control (PSC) is someone who owns or controls your company. They’re alternatively known as beneficial owners in other countries.
• If a UK company is owned by a trust, if the trust meets any nature of control, it will need to record all the trustees as Persons of Significant Control (PSC) of the company and register this information at Companies House

Appeal court Jiminez vs First tier HMRC extraterritorial request of information on tax status weakness relies on tax treaties to enforce request

The Court of Appeal determined that HMRC had power to issue a compulsory information request to an individual UK taxpayer outside the UK for the purpose of checking that individual’s tax position.

The decision is silent about the extent to which HMRC can issue compulsory information requests to third parties outside the UK (i.e., requests for the purposes of checking another person’s tax position). The better view is that whether such a request will be valid turns on whether the third party is “sufficiently connected” with the UK.

• Schedule 36 Finance Act 2008 confers on HMRC power to compel production from a person: a) for the purposes of checking that person’s tax position; and b) for the purposes of checking another person’s tax position.
• Schedule 36 is silent about the territorial scope of those powers. It says nothing about whether the intended recipient of the notice must be present or resident within the UK, for the powers to be operable.
• A person can be a UK taxpayer without ever having set foot within the UK, e.g. imposition of capital gains tax on non-residents in respect of disposals of UK real estate.
• As such, and although HMRC can ask the authorities in many foreign jurisdictions to obtain and transmit documents and information from persons within that foreign jurisdiction pursuant to various bilateral and multilateral treaties, it is conceivable that HMRC would want to issue a taxpayer or third-party notice to a person outside the UK.

• Court decides HMRC can extraterritorially issue a compulsory information request to an individual UK taxpayer outside the UK for the purpose of checking that individual’s tax position The Court of Appeal started at the same point as the High Court, approaching the issue as a matter of statutory interpretation, and accepted that the purpose of Schedule 36 was to supply HMRC with powers to verify a taxpayer’s self-assessment position. The Court was not persuaded, however, that the fact Parliament most likely intended Schedule 36 inspection powers to be limited in scope to premises within the UK and was not limited in their international outlook.
• The Court noted that many UK taxpayers would be persons resident outside the UK, and hence concluded it was inherently unlikely that Parliament had intended taxpayer notices to operate on an entirely domestic plane.
• Putting it another way, the subject matter of Schedule 36 (checking the tax liability of potential UK taxpayers) supplied a sufficient connection between the non-UK recipient of the taxpayer notice and the UK jurisdiction to justify the conclusion that Parliament intended to legislate in an extraterritorial fashion.

• Most information exchange provisions in bilateral tax treaties are exercisable only once the requesting authority has exhausted its normal procedures under domestic law to obtain the information sought.
• Since the Court of Appeal has made clear that HMRC’s domestic powers (i.e., the power to issue a taxpayer notice) can be exercised cross-border, it follows that HMRC should not make use of the relevant tax treaty information exchange mechanism (to obtain information and document from a taxpayer) until it has issued and sought to enforce a taxpayer notice.

• The Court of Appeal’s decision was concerned only with the extra-territoriality of HMRC’s power to issue taxpayer notices. The position in relation to third party notices was not addressed.
• The Court decided that section 2 “extends extraterritorially to foreign persons in respect of documents held outside the jurisdiction when there is a sufficient connection between the person and the jurisdiction”. The Court held that whether a “sufficient connection” existed was a fact sensitive issue to be determined on a case-by-case basis

1. 1. 1. whether the third party is resident, incorporated, or engaged in activities, in the UK;
      2. whether the request relates to property held by the third party in the UK;
      3. whether the request relates to transactions entered into by the third party in the UK.

• The decision of the High Court that HMRC’s powers under Schedule 36 were territorially limited and that if HMRC wants to seek information about liability to UK tax from persons who are abroad it should rely on mutual assistance arrangements (tax treaties or MCAA) with the relevant state was highly significant.
• HMRC had accepted the restriction in its guidance.
• It should be noted that the decision is limited to taxpayer notices. It is not clear whether HMRC will seek to apply the same analysis to third party notices.