A potential new problem for Trustees

As if being a Trustee was not onerous enough, along come the US government to add to their woes.

The Foreign Account Tax Compliance Act (commonly known as FATCA) was introduced by the US federal government some time ago. This requires all worldwide financial institutions to register with the US government and, as a result of a US/UK government agreement, for such UK institutions to make annual reports to HM Revenue & Customs of transactions with US residents and US citizens.  Even if there are no transactions with US resident or citizens, there is still the need to make nil returns. 

So why does this affect UK trustees? Whilst not intended by the US authorities, because the definition of financial institution is widely defined, as well as including banks and investment managers, it includes trusts where the trust has a discretionary investment portfolio.

Most investment managers in such circumstances, but not all, are offering an Owner Documented agent service, which will prevent the trust (and a named trustee) having to register with the US Internal Revenue Service (IRS). However, this only covers assets in that investment managers’ custody and you may need to supply your investment manager with significant additional information. If the trust has other assets, then the trustees may have to register anyway.

Charitable trusts are exempt from registration with the IRS. Trusts holding only UK real estate and trusts with execution only or advisory investment portfolios do not need to register either, but they may receive requests for information from their banks.

Registration with the IRS is not difficult – it takes about ten minutes – and you generally receive your Global Intermediary Identification Number (GIIN) within 48 hours of registering.  This GIIN could be very helpful if opening new bank accounts etc.  When registering, it is probably sensible to have a second point of contact registered rather than just a single trustee as the responsible individual.  You need to register by the end of the year.  Once registered with the IRS, you only need to communicate with them if the registration details change or if you need to cancel your registration e.g. if the trust comes to an end.

However, you don’t just have to register with the IRS.  Once you have your GIIN, you need to register with HM Revenue & Customs and make annual reports to them on a calendar year basis by 31 May in the following year.  This may make an Owner Documented agent service, where available, less time consuming in the medium to long term.

Finally, further problems exist for UK trusts that have beneficiaries in the crown dependencies e.g. the Channel Islands, Isle of Man, BVI, Cayman Islands etc.

For more information, please contact Vince Cheshire, UK Private Client Services Director at vince.cheshire@tmf-group.com or call 01582 439270.

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