As we explained in our newsletter on 15 June 2017, the form 41G(trusts) was withdrawn on 1 May. To inform HMRC of a new trust or estate for tax purposes you need to use the online registration service.
As with any new source of income, the trust or estate should be registered with HMRC by 5 October following the tax year in which it was set up. However, the new online trusts registration service is still not fully functional. At present, it can only be used by lead trustees and personal representatives. HMRC has said that tax agents will be able to register a new trust in early autumn – whenever that may be.
As tax agents will not have time to register all new trusts before 5 October 2017, HMRC has extended the registration period by two months. No penalty will apply if the registration of the trust is completed by 5 December 2017. More details will be announced in the HMRC Trusts and Estates newsletter due to be published today.
As contractor rates have tightened, and net take-home has decreased, some taxpayers are tempted by schemes which claim to reduce their tax burden by using a trust. A typical example requires the end client to pay into a trust, which is set up to benefit the contractors who supply services to the end client. The contractors receive loans from the trust, which are unlikely to be ever repaid.
It is amazing that such schemes are still marketed, but they are. HMRC has recently made an official complaint to the Advertising Standards Authority (ASA) about the misleading claims included on the website of Knight Wolffe about their income trusts scheme. The ASA has ruled that the claims made by Knight Wolffe were misleading and had to be withdrawn. This ruling is binding on promoters of similar tax schemes.