This note is for subscribers only.
HMRC's latest Trusts and Estates newsletter contains some useful information. Here is our enhanced version.
- Refreshed versions of the main Trusts and Estates and supplementary Capital Gains Tax for trusts and estates toolkits were published in April.
- The Capital Gains Tax for trusts and estates toolkit provides guidance on the errors HMRC find commonly occur in relation to Capital Gains Tax for trusts and estates. Use this toolkit if you need to complete form SA905 trust and estate capital gains supplementary pages.
- In July, the Inheritance Tax (IHT) toolkit was refreshed to assist in completing IHT Account form IHT400. The toolkit may be helpful when completing the excepted estate forms IHT205 or C5 (for Scotland) as many of the considerations, such as valuation, also apply to these.
- The HMRC toolkits can be found here and here for IHT.
IHT Disclosure of Tax Avoidance Schemes (DOTAS) Guidance Update
- The guidance on the new IHT hallmark has been included in HMRC’s guidance on the DOTAS regime as a new Chapter 13.
- See DOTAS: Disclosure of tax avoidance schemes for more details.
IHT Guidance and professional valuations
- HMRC have recently made some amendments to their guidance on the valuation of individual items within an estate.
- Previous guidance across both excepted and non-excepted estate regimes varied, but suggested that professional valuations should be sought for any individual item above £500.
- The guidance has been updated to advise that valuations should only be sought if you think an item may be worth more than £1,500 or where the value of an item cannot be reasonably estimated.
- This update has not changed the way that valuations should be conducted and items should still be valued using the open market value at the date of death, not an insurance or replacement value.
- See Inheritance tax & Probate
Inheritance Tax and Clarification of Timelines
- A new process and timeline applies to form IHT400s processed by HMRC on or after 16 April 2018.
- HMRC say ‘we aim to issue the IHT421 within 10 working days of receiving your form IHT400 Inheritance Tax Account, or payment of tax, whichever is later’.
- The 10 working days referred to starts on the day HMRC receive your account or payment, whichever is later, and ends when they issue the IHT421.
- You will need to allow additional time for your forms to reach HMRC and for the IHT421 to be posted back to you; this can add an additional 5-10 working days.
IHT Process: Residence Nil Rate Band
- HMRC recently encountered a problem with the interactive functionality on form IHT436 which is used to claim the main residence nil rate and and removed the interactive version until the issue had been resolved. It has now been resolved and the interactive version has been republished.
- See Main residence nil rate band
Trusts Registration Service (TRS)
- UK agents and trustees should no longer use paper registration forms unless you have written agreement from HMRC to do so. Registrations should be carried out online.
- Issues with Agents Online Services were rectified on 12 January 2018. If you are still experiencing difficulties, call the Trusts and Estates Helpline on 0300 123 1072.
- Trusts and complex estates with a liability to Income Tax or Capital Gains Tax in 2017/2018 who have not already registered on TRS will need to complete registration by 5 October 2018.
- The trustees of all other trusts that have incurred a tax liability in the tax year 2017/2018 must register beneficial ownership information about the trust on TRS by 31 January 2019 if they have not already done so, that is, if a trust has had previous tax liabilities, but did not incur a tax liability in 2016/2017 so was not required to register on TRS at that point.
- If a pension scheme set up as an express trust is registered on HMRC’s Manage and Register Pension Schemes or Pension Schemes Online then it does not need to register on the TRS.
- Pension schemes that are not registered on Manage and Register Pension Schemes or Pension Schemes Online, and are set up as express trusts and incur a UK tax liability will need to register on the TRS no later than 31 January after the end of the tax year in which they incurred a UK tax liability.
Updating the TRS
- Currently it is not possible for lead trustees and their agents to update their registered information or to declare that there have not been any changes on the TRS. Updates on when this functionality may be available will be provided in future newsletters.
- If you need to inform HMRC that the lead trustee or trust correspondence address has changed then please write to:
HM Revenue and Customs
- There is a specific question (number 20) on the SA900 trust tax return asking if the TRS has been updated. For now, please submit completed SA900 forms without answering Question 20 and leave the tick box blank. You will not be penalised for not answering Question 20.
- See UK Trusts
European Union (EU) Fifth Money Laundering Directive
- The fifth version of the EU-wide Money Laundering Directive (5MLD) entered into force at EU-level on 10 July 2018
- Article 31 of 5MLD requires Member States, including the UK, to extend registration of beneficial ownership of trusts to all UK resident express trusts and non-EU resident express trusts that own UK real estate or that have a business relationship with an entity obliged to carry out customer (anti money laundering) due diligence, such as a bank, estate agent or accountant. 5MLD also requires Member States to share data from the register under certain defined circumstances, in particular as part of the customer due diligence requirements mentioned above.
- Member States, including the UK, have until 10 January 2020, to transpose the 5MLD into domestic law and until 10 March 2020 to implement the trust registration requirements.
- HM Treasury will carry out a policy consultation in winter 2018/19 followed by a consultation on the draft secondary legislation in spring or summer 2019.
Common Reporting Standards (CRS) and United States Foreign Account Tax Compliance Act (FATCA)
- Trusts who need to report under CRS or FATCA can do so without a Unique Taxpayer Reference (UTR). These trusts need to set up a government gateway account as an organisation. If you report details of a trust that has no UTR then you should select the option ‘Financial institution does not have a UK tax identifier’.
- Further details and guidance on how to report exchange of information is available on gov.uk or email:
Administration period of Deceased’s Estates: Income Tax and Capital Gains Tax
Informal Payment Arrangements
- The tax liability of most deceased’s estates during the administration period is straightforward and can be dealt with by HMRC Pay As You Earn and Self-Assessment.
- Personal representatives (executors or administrators) provide HMRC with a calculation of the amount of tax due. HMRC will provide a payment slip with a reference number, for this payment only, for the Personal Representative to then make a one-off informal payment of the total tax liability for the whole period of administering the deceased’s estate, provided certain conditions are met.
- The main condition is that the total tax liability (Income Tax plus Capital Gains Tax) for the entire administration period is £10,000 or less. The other conditions are that:
- The probate or confirmation value of the estate is not more than £2.5m.
- The proceeds of assets sold by the personal representatives in any one tax year are not more than £250,000 for deaths up to 5 April 2016, or not more than £500,000 for deaths after 5 April 2016.
- The estate is not regarded as complex, so it can be dealt with without the personal representatives having to complete a Self-Assessment return.
- The informal payment procedures can only be used once and only when the administration period has ended.
- All informal payments made for the administration period, should include the reference number provided by HMRC for payment of the administration period tax due. Further details on payment can be found here.
- HMRC Administration of Estates Cardiff is responsible for dealing with all aspects of the period of administration where the case is regarded as a complex case.
- An estate is considered complex if:
- The probate or confirmation value of the estate is more than £2.5 million.
- The tax due, Income Tax and, or Capital Gains Tax for the whole of the administration period exceeds £10,000.
- The proceeds of assets sold by the personal representative in any one tax year for date of deaths up to 5 April 2016 exceeds £250,000 or £500,000 for date of deaths after 5 April 2016.
- If the estate does not fall into any of these categories but cannot easily be dealt with under the informal payments procedures (above), contact HMRC Administration of Estates Cardiff for advice on who should deal with the administration period liability.
- Estates are not part of the TRS requirements, but the method by which complex estates register with HMRC is through the same online process. Personal representatives of complex estates are required to use the TRS to obtain a UTR number for the estate they are administering.
See UK trusts for more information on how to register an estate on TRS.
- If an estate is complex, a Self-Assessment Trust & Estate tax return SA900 will be required for each year of the Administration period.
- For Income Tax due over £10,000 the estate would be in receipt of gross income exceeding £50,000 during the whole of the administration period which could be from one or various sources: bank and building society interest, dividends, property related income.
- If the £10,000 Income Tax due is exceeded HMRC should be notified as a Self-Assessment Trust & Estate tax return SA900 will be required.
- Where an estate has been reported as informal at the end of the administration period and then a condition for complex estates is triggered the estate should be registered on the TRS and a Self-Assessment Trust & Estate tax return SA900 will be required for each year of the administration period. Payments made using the informal route will be transferred and used against the total tax now due and included in the Self-Assessment statement of account.
Further information can be found in the Trusts, Settlements and Estates Manual (TSEM7000+).
HM Revenue and Customs
Administration of Estates
Deceased Estate Telephone Helpline: Get advice on a deceased person’s estate about Income Tax and Capital Gains Tax by calling 0300 123 1072.
Trusts and estates Newsletter: August 2018
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