If you are a trustee of a trust that holds an investment portfolio and the below may be relevant to you.
Registration is required by the end of December, so urgent action might need to be taken to avoid penalties. This announcement has only just been released so we have had very little time to review and react so we apologise for the tight timescale.
UK trusts that qualify as “reporting financial institutions” or “trustee-documented trusts” must now register with HMRC’s Automatic Exchange of Information (AEOI) service by 31 December 2025 (or 31 January following the relevant year), even if they have no reportable accounts.
This requirement stems from recent changes and applies to trusts meeting FATCA or CRS/DAC2 criteria.
Failure to register can result in penalties starting at £1,000 plus daily fines of up to £300
For some years the UK has required “financial institutions”, generally understood to be institutions such as banks and investment providers, to collect information on non-residents who hold accounts with them and report this to HMRC. HMRC has then exchanged this information with other countries most notably the US under the Foreign Account Tax Compliance Act (FATCA) and other OECD countries under Common Reporting Standard (CRS) subsequently extended by the EU Directive on Administrative Cooperation (DAC2). These form part of the UK’s Automatic Exchange of Information (AEOI) regime, which is designed to combat tax evasion through global transparency.
The tests in determining which entities are covered are complex but the main test relevant to most trusts is the “investment Entity” test. This test asks whether 50% or more of the trust’s income comes from investments and the trust has a discretionary fund manager. If the answer to both is yes then the trust is generally a reporting Financial Institution (FI). A trust with investment income could alternatively be a Trustee-Documented Trust. Again, this requires more than 50% of the trust’s income to come from investments but here one of the trustees is an FI itself, typically a corporate trustee.
Historically, only Fis which needed to make an Automatic Exchange of Information (AEOI) return with HMRC needed to register with HMRC. In the case of a UK trust which qualified as an FI this would typically be where one or more of the settlors, trustees, or beneficiaries were non-resident. Recent changes under the International Tax Compliance (Amendment) Regulations 2025 introduce a new mandatory registration requirement for all “reporting financial institutions” and “trustee-documented trusts” requiring registration with HMRC’s Automatic Exchange of Information AEOI service by the later of 31 December 2025 or 31 January following the year in which they first meet the definition for FATCA or CRS (as extended by DAC2) purposes, even if they have no reportable accounts.
Penalties:
HMRC have advised the following penalties for failure to register:
- £1,000 for failure to comply with notification requirements
- Daily penalties of up to £300 if, after notice of the penalty has been issued the failure continues.
It is only recently that detailed guidance on the procedures required to comply with these new obligations has become available and with the deadline of 31 December 2025 (or 31 January following the relevant year) now approaching, time is limited to ensure compliance.
Next Steps:
The trustees should assess whether the trust meets the criteria for mandatory registration with HMRC’s AEOI service and complete the registration if required.
We can review your trust’s position and, if required, complete the HMRC registration on behalf of the trustees. Please let us know if you would like us to assist.
