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This publication is available at https://www.gov.uk/government/publications/hm-revenue-and-customs-trusts-and-estates-newsletters/hmrc-trusts-and-estates-newsletter-september-2017
Welcome to the September 2017 edition of the HM Revenue and Customs (HMRC) Trusts and Estates Newsletter.
We don’t have a mailing list for the newsletter.
Trusts Registration Service
We’ve launched a new Trusts Registration Service (TRS), so that trustees can register their trust online and provide information on the beneficial owners of the trust. The new service launched in early July for trustees and replaces the 41G (Trust) paper form, which was withdrawn at the end of April.
Under existing self-assessment rules, the trustees (or their agents) must register details of a trust with HMRC by 5 October of the year after a liability to Income Tax or Capital Gains Tax (CGT) first arises. The registration process, which will need completing via TRS, will include providing information about the beneficial owners of the trust. In subsequent years, or where the trust is already registered for self-assessment, the trustees (or their agent) of either a UK or non-UK (express) trust that incur a UK tax liability are required to provide beneficial ownership information about the trust, using the TRS, by 31 January after the end of tax year.
The new service is not currently available to agents. Agents will be able to register on behalf of trustees from October 2017 and agents and lead trustees can enter updates for changes of circumstances from early 2018.
In this first year of TRS, to allow sufficient time to complete the registration of a trust for self-assessment and provide beneficial ownership information there will be no penalty imposed where registration is completed after 5 October but before 5 December 2017.
The new service will provide a single online service for trusts to comply with their registration obligations, will improve the processes around the administration of trusts, and allow HMRC to collect, hold and retrieve up to date information in a central electronic register.
Additional information is available at:
- Trustees - tax responsibilities
- April 2017 Newsletter
- Talking Points webinar on TRS
- regulations supporting the introduction of TRS
Inheritance Tax (IHT) Online
A new digital service to help those needing to apply for a grant of probate is now available. This replaces the paper IHT205 process.
Executors in England and Wales without IHT to pay will now be able to use this digital service, available at Inheritance Tax: return of estate information (IHT205 (2011)), instead of completing a paper form.
There are many benefits of using this new service for personal applicants:
- it’s quicker and easier to follow than the paper IHT205 form
- only questions that are relevant to you are displayed
- it tells you what information needs to be provided to the probate office
- you’ll get online help and guidance to complete the details and helpful links to supporting information
Customers are eligible to use the service if the following apply:
- they are the personal representative of the person who has died (for example, the executor)
- they are applying for a grant of representation (for example, probate) in England and Wales
- no IHT is payable
If you are a professional agent you should continue to use your existing processes.
You need to read the guidance on valuing the estate of some who’s died.
Trusts - taxable pension lump sum death benefits paid to trusts
HMRC have developed 2 new forms to help trustees and pension scheme administrators meet their information obligations on taxable lump sum death benefits paid to trusts from pension schemes.
The new forms are now available for trustees and scheme administrators to use.
When a pension scheme pays a taxable lump sum to a trust after the pension holder dies, the payment is taxed at 45%. This tax charge is called the special lump sum death benefits charge.
If the trust then makes an onward payment to a beneficiary (or beneficiaries) that is funded (or partly funded) from the pension lump sum death benefit payment, the pension tax rules allow the beneficiary to claim a credit for the 45% tax paid by the pension scheme administrator on the original lump sum. This may lead to a refund of tax.
Allowing the beneficiary to claim a credit for the 45% tax paid on the original payments puts the beneficiary in the same position as if the lump sum death benefit had been paid directly to them by the pension scheme.
To help the beneficiary reclaim any refund of tax that may be due, there are information requirements on the trust and the pension scheme administrator for these payments.
Pension scheme administrators should use R185 (Pension scheme admin) to provide information to a trustee, who is not a bare trustee, about a lump sum death benefit that was subject to the special lump sum death benefits charge under section 206 Finance Act 2004. Pension scheme administrators should provide this within 30 days of making the payment to the trust. The trust receiving the payments should keep this form.
The trustees will need this so they can provide this information to the beneficiary if they make an onward payment.
A trustee, who is not a bare trustee, should use R185 (LSDB) to provide information to a beneficiary about a payment made to that beneficiary funded by a lump sum death benefit that was subject to the special lump sum death benefits charge under section 206 Finance Act 2004.
Trustees should provide this to the beneficiary within 30 days of making the payment, or within 30 days of receiving the information from the pension scheme administrator, whichever is the later date.
HMRC also has an IHT agent toolkit to assist you with completing IHT Account form IHT400. We ensure any change to legislation are updated promptly in the toolkit to make sure you receive the right advice and guidance when completing form IHT400.
A new section has recently been added to the toolkit identifying whether the deceased disposed of property on their death that qualifies their estate for the residence nil-rate allowance (RNRA) which came into effect on 6 April 2017. There can be a number of potential risks with the application of new legislation after its introduction, which might result in RNRA that is incorrectly claimed, or not claimed at all.
The IHT agent toolkit provides a brief overview of this new legislation along with links to available guidance to assist you in understanding whether the estate qualifies for RNRA.
HMRC has 20 online agent toolkits covering a range of topics. These provide guidance on areas of error that HMRC frequently see in returns, setting out steps that you can take to reduce those errors and improve tax compliance.
Heritage Relief - Reasonable Opening Times for access to buildings of outstanding historical or architectural interest
Owners of buildings that are designated for conditional exemption or for the purposes of a Maintenance Fund on the grounds of their outstanding historical or architectural interest (s.31(1)(c) Inheritance Tax Act 1984) must allow reasonable public access on a set number of days per year.
The undertaking given at the point of designation specifies the access is on an open basis not ‘by appointment’ and the number of days, though not the period each day, when the property will be open. The access maybe given either by guided tours (pre-booked where space is limited) or free flow access and should be for at least four hours between 10am and 5pm unless, exceptionally, HMRC agree otherwise.
The published guidance Capital Taxation and the National Heritage (page 61) states that the question of access relates solely to the nature of the building concerned and not to the personal circumstances of the owner.
Future undertakings for outstanding buildings will include a reference to the opening hours as set out above.
An essential part of giving access is that the arrangements for open access should be advertised locally, by signs at the property concerned and through the local tourist board and similar outlets and nationally, ideally via the internet.
Home Loan Scheme/Double Trust Scheme Guidance Note
HMRC have now received a number of requests for guidance on the IHT implications of unwinding home loan or double trust schemes, and whilst a decision on the correct treatment of these schemes is awaited, HMRC have agreed the IHT consequences arising from unwinding such arrangements. Unwinding schemes will have consequences for IHT and the guidance note confirms our approach if schemes are unwound.
HMRC is not able to provide advice for scheme promoters or individual settlors on how to unwind schemes, and the guidance is intended only to confirm the IHT consequences of unwinding. Please note that in some circumstances taxpayers will need to consider the CGT or Income Tax consequences of unwinding the scheme in relation to the loan.
When the home loan or double trust scheme has been unwound a repayment of all the pre-owned assets (POA) Income Tax paid can be claimed.
The guidance note itself can found at IHTM44120.
Submitting IHT payments
Please continue to send them direct to HMRC Cumbernauld with any payslip and ensure the IHT reference or Name of Deceased or Transferor is written on the back of the cheque. This will make sure that payments are cashed as quickly as possible.
HM Revenue and Customs
St Mungo's Road
Changes to Inheritance Tax forms
New versions of the following forms are available.
Main changes to forms in the IHT400 suite of forms.
Online version - Introductory warning not to use the 15-digit reference number from the estate report.
Page 3 - Request for payee details for repayment of IHT reinstated.
Page 12 - ‘Working out the IHT’ section expanded.
Page 16 - IHT return address updated.
Page 1 - DX address removed.
Page 2 - Notes section - sentence now reads ‘PA1 section 7.5’.
Page 1 - IHT return address updated.
Pages 2 and 3 - ‘Tell us who is applying’ removed.
Main change to a form in the IHT100 suite of forms.
Page 1 - IHT return address updated.
Pages 3 and 4 - ‘Tell us who is applying’ removed.