Improving HMRC guidance on Gift Aid donor benefits

Emily Deane TEP

STEP has been invited to join an HMRC Working Group which will review the guidance on Gift Aid donor benefits. The Working Group will review the interpretation of the rules that apply to donor benefits within the HMRC guidance covered by Chapters 3.18 to 3.25.


Representatives have been selected from the charity sector, HMRC and HMT and the group held its first meeting hosted by HMRC last week. The group has initially identified the need to include the valuation of certain benefits for application of the relevant value test; the meaning of the ‘in consequence’ rule; and the correct application of the split payment rule.

The objective of the working group is not to amend the legislation or policy but simply to clarify and improve the guidance. HMRC has confirmed that proposed changes to the guidance cannot extend, override or supplement any statutory provisions.

HMRC is keen to mitigate the confusion and litigation that can ensue when the guidance is misinterpreted by charities and donors, for example, when gift aid contributions are misunderstood from the donor’s perspective which can lead to HMRC demanding large refunds. The overriding objective of the working group is to enhance the guidance to make it work as efficiently as possible and promote best practice within the sector.

Tell us your views

We would like to invite STEP members to provide examples of how the guidance could be improved in order to clarify interpretation of the existing legislation. You may wish to provide examples of how the guidance can be misinterpreted or, alternatively, mark up the guidance to show suggested changes.


Once HMRC has collected the proposed changes from the working group representatives they will refer the guidance to HMRC’s solicitors for review prior to publication. The estimated date for publication is early 2019.

We would very much value your input. Please send your feedback to by 15 November 2017.

Emily Deane TEP is STEP Technical Counsel

Update: TRS now open to agents

Simon HodgesUpdate: 19 October

HMRC has asked us to disseminate the following:

‘The new TRS is now available for agents to use. As part of this online process, agents will be taken through the steps to create an Agent Services account before they can register on behalf of trustees.

Agents use the link from to register a trust. As part of that journey, the agent will be asked to create an Agent Services account, and the agents will be directed to request access to the Trust Registration Service by email. The agent will receive a response from HMRC giving them access to Agent Services and some guidance on what to do next. Once they have created an Agent Services account they will be directed to the Trusts Registration iform.

In registering for an Agent Services Account they will have been identified as seeking to access the TRS, and will not be offered the option of linking existing government gateway IDs and client relationships. This is only undertaken by agents participating in the controlled go live of MTDfB.’

We are aware, however, that there are reports that Agent Services – and, therefore, TRS – will not be fully live for agents until the end of October or the beginning of November, though this may be subject to change. We will update members as and when we get more information. In the meantime, we have reported on the TRS issues in today’s Industry News: UK Online Trust Registration Service now available to agents.

Original blog

HMRC has confirmed that, from last night (17 October), the Trust Registration Service (TRS) is now available to agents filing on behalf of trustees. This follows last week’s announcement, that due to technical errors, there were delays in allowing agents access to the system.

HMRC has also confirmed that there will be no penalty imposed where registration is completed after 5 October 2017 but before 5 December 2017. STEP has inquired with HMRC whether there is any potential flexibility in that deadline, and we will update members on the outcome of those discussions. However, at the time of writing, the deadline of 5 December remains.

HMRC’s statement in full:

‘From today, the Trust Registration Service (TRS) is available to agents filing on behalf of trustees. Please see the following link for further details on how to gain access to the TRS:

The new TRS allows agents, acting on behalf of trustees, to register trusts and complex estates online and to provide information on the beneficial owners of those trusts or complex estates. The new service, which was launched in July 2017 for lead trustees, replaces the 41G (Trust) paper form, which was withdrawn at the end of April 2017. This is now the only way that trusts and complex estates can obtain their SA Unique Taxpayer Reference. As part of this online process, agents will be taken through the steps to create an Agent Services account before they can register on behalf of trustees.

In this first year of TRS, to allow sufficient time to complete the registration of a trust or complex estate for SA and provide beneficial ownership information, there will be no penalty imposed where registration is completed after 5 October 2017 but before 5 December 2017.

For both UK and non-UK express trusts which are either already registered for SA or do not require SA registration, but incur a liability to relevant UK taxes, the trustees are required to provide beneficial ownership information about the trust, using the TRS, by 31 January following the end of tax year. This means, if the trustees of a UK or non-UK express trust incurred a liability to any of the relevant UK taxes in tax year 2016-17, in relation to trust income or assets, then the trustees or their agent need to register that trust on TRS by no later than 31 January 2018.

The relevant taxes are:
• income tax
• capital gains tax
• inheritance tax
• stamp duty land tax
• stamp duty reserve tax
• land and buildings transaction tax (Scotland).

The new service will provide a single online service for trusts to comply with their registration obligations. This will improve the processes for the administration of trusts and allow HMRC to collect, hold and retrieve information in a central electronic register.

More information is available in HMRC’s September Trusts & Estates Newsletter.

Finally, on Monday 9 October we published our guidance in the form of an FAQ note to help our customers understand the TRS requirements.’

Simon Hodges is Director of Policy at STEP.

Technical hitches remain for access to UK Trust Registration Service

Simon HodgesAgents remain unable to access the Trust Registration Service (TRS) after technical errors were identified in the system, HMRC has confirmed. However, the deadline for completing the register of a trust for self-assessment and providing beneficial ownership information remains 5 December 2017.

This news comes shortly after HMRC published its comprehensive guidance for the new online register of trusts on Monday 9 October, following the launch of the service in July 2017. This was to be the first phase, allowing trustees to access the TRS, and so ensuring that HMRC met with the basic legal requirements of the EU Fourth Anti-Money Laundering Directive.

The second phase, allowing agents to access the TRS on behalf of trustees, was to be delivered in October. However HMRC has notified STEP that it has identified technical errors in the course of testing this phase. HMRC reassures us that it is resolving these issues as quickly as possible, so that the system works from the moment it is released.

HMRC has also reiterated the timeline, noting that there will be no penalty imposed where registration is completed after 5 October 2017 but before 5 December 2017.

HMRC has said it will provide STEP with an update next week. We will keep members informed.

Simon Hodges is Director of Policy at STEP

STEP LatAm Conference 2017 in Colombia

CartagenaA sell-out audience of over 370 delegates has been attending the 2017 STEP LatAm Conference in Cartagena, Colombia this week. The fact that they managed to get here in spite of a local transport strike made me feel, as a Brit, rather at home, but it also shows what a strong following the annual STEP Latam Conference now has.

Looking at STEP in the Americas, we now have a network of well over 40 branches with, between them, almost 5,500 members. This makes our major conferences a major meeting place for practitioners across both North and South America.

STEP Colombia is one of our newer STEP branches, but has a group of committed volunteers working hard to establish STEP in the jurisdiction as a way of enhancing professional knowledge and building international links in the fast-developing country. Cartagena was an inspired choice of venue for the event; as a major UN World Heritage site with an immaculately preserved historic centre, it proved highly appealing for delegates from further afield.

The twin issues of the European pressures for public registers of beneficial ownership and the implications of the US’ non-participation in the Common Reporting Standard (CRS) were just two of the key themes explored in the conference, which Patricia Wass TEP, Chair of STEP Worldwide and Luz Alfonso TEP, Conference Chair and one of the founder members of STEP Colombia, jointly opened.

After this year’s enormous success, many are already looking forward to next year’s STEP LatAm Conference in Mexico.

George Hodgson is Chief Executive of STEP

Proposed EU rules for tax planning intermediaries

European flags in BrusselsIn June 2017 the European Commission published draft legislation containing new rules for tax-planning intermediaries who design or promote cross-border tax planning arrangements. The stated objective is to identify and assess schemes that are potentially facilitating tax evasion or avoidance in order to block harmful arrangements in the early stages.

The proposals require intermediaries to report details of any arrangement that features defined ‘hallmarks’ (outlined below) to their own tax authority within five days, beginning on the day after the arrangement was made available to the taxpayer.

The new proposals are an amendment to the Directive for Administration Cooperation (DAC) and will be submitted to the European Parliament for consultation and subsequent adoption. It is anticipated that they will take effect on 1 January 2019.


‘Intermediaries’ has a wide definition within the proposals and is described as anyone ‘designing, marketing, organizing or managing the implementation of the tax aspects of a reportable cross-border arrangement, or series of such arrangements, in the course of providing services relating to taxation.’

An intermediary could be a company or professional, including lawyers, tax and financial advisors, accountants, banks and consultants. An advisor who deals with any type of direct tax such as income, corporate, capital gains, inheritance tax, etc, will fall into the reporting remit.


A tax-planning arrangement will be considered reportable if it features a ‘hallmark’ that is defined within the Directive, and the onus will be on the intermediary to report it. These hallmarks are considered to be characteristics within a transaction that may enable the arrangement to be used to avoid or evade paying taxes.

If one of more of the following hallmarks is identified then the arrangement must be reported:

• A cross-border payment to a recipient in a no-tax country.
• Involvement with a jurisdiction with weak or insufficient anti-money laundering legislation.
• An arrangement set up to avoid reporting income in accordance with EU transparency rules.
• An arrangement set up to circumvent EU exchange requirements for tax rulings.
• If it has a direct correlation between the fee charged by the intermediary and the amount that the taxpayer will save in tax avoidance.
• If it does not ensure that the same assets benefit from depreciation rules in more than one country.
• If it does not enable the same income to benefit from tax relief in more than one jurisdiction.
• If it does not respect EU or international transfer pricing guidelines.


The Member State in which the arrangement is reported must automatically share the information with all other Member States via a centralised database on a quarterly basis. The information needs to be completed using a standard format, which will require details of the intermediary, the taxpayer and the scheme being recommended. Member States are obliged to implement proper penalties if intermediaries fail to adhere to the reporting requirements, and each Member State has to enforce its own national sanctions.


Some Member States already have mandatory reporting requirements in place for intermediaries, such as the UK, Ireland and Portugal. The reporting requirements are designed to assist Member States in closing loopholes when it comes to tax abuse as well as deterring the use of aggressive tax planning schemes across the EU.

STEP will continue to monitor developments in relation to these new measures, and will inform members of any new information as soon as it is released.

Emily Deane TEP is STEP Technical Counsel

STEP members input into reform of the law of wills

doctor with patientEarlier this week STEP held the second of three consultation events on the reform of the law of wills in England and Wales. Law Commission representatives Dr Nick Hopkins and Spencer Clarke invited feedback from STEP members in England and Wales on key areas of the consultation including, capacity, statutory wills, formalities, electronic will-making, protecting vulnerable testators and revocation.

At both events, practitioners raised substantial issues relating to the review of the test for capacity to make a will under Banks v Goodfellow (1870), the review of the formality rules, the introduction of court dispensing powers and further possible protection measures for vulnerable testators.

Some particularly pertinent questions that initiated discussion amongst members at the events were:

• How can the Golden Rule (where the making of a will by an elderly or ill testator is witnessed or approved by a medical practitioner who is satisfied of their capacity) be improved?
• Should the Wills Act adopt the Mental Capacity Act 2005 for decisions regarding testamentary capacity?
• Could other professionals such as psychiatrists assess capacity, not just medical practitioners?
• Should the ‘attestation’ requirement be removed?
• Should a dispensing power be introduced to allow judges to override a will formality that has been overlooked, for example, missing witnesses?
• Should the marriage revocation clause be reconsidered or removed?
• Is there scope for expanding the undue influence doctrine, in order to further protect vulnerable testators?
• Could there be more clarity separating the concepts of undue influence, and knowledge and approval?
• Have nominations been taken into consideration, particularly considering they require far less formalities than wills?
• Do domicile and residence issues need to be considered, including how the new rules would operate within other jurisdictions?

Members note that these roadshow type events are invaluable in the consultation process. The Commission, in turn, has been pleased with the response from members at both events.

Following the consultation deadline on 10 November 2017 there will be an analysis stage, after which a report and impact statement will be published by the Commission and subsequently a draft Bill.

Spaces are still available at the Manchester event on 18 October at Mills & Reeves LLP.

If your firm is unable to attend a consultative event, but would like to submit some feedback on the consultation to be incorporated into STEP’s consultation response, please contact by 30 October.

Emily Deane TEP is STEP Technical Counsel

Policy watch: Debating the UK Finance Bill

Simon HodgesSTEP members may be interested in a reasoned debate that took place last Wednesday, 6 September in the UK House of Commons, which gave some insight into the view of both the opposition and the government as to how offshore trusts are perceived.

Parliament came back from its summer holidays last week, albeit not for long (it goes back into recess on Thursday when MPs go off for conference season), but already lively discussions have been had over tax issues as part of a debate on the elements of the Finance Bill that were held up before the summer due to the general election.

Overall, 48 Finance Bill resolutions were left outstanding from the previous session. With the Brexit bill seemingly taking up most of the short amount of parliamentary time available this month, this bit of legislative housekeeping didn’t attract the biggest crowd but raised some interesting points none the less.

The 48 resolutions were debated together, though some areas were clearly more interesting to MPs than others, not least the issue of non-domiciled tax status. Speaking on the subject, Mel Stride, the Financial Secretary to the Treasury, said that the measures in the Finance Bill would help to make the tax system fairer while also forecast to raise GBP1.6 billion over the next five years. He added that: ‘Most importantly, permanent non-dom status for people resident in the UK will be ended, so that they pay tax in the same way as everybody else.’

Peter Dowd, Labour’s Shadow Chief Secretary to the Treasury, naturally disagreed, calling the measures on domicile ‘sieve-like’ and arguing that the rules on business investment relief ‘will allow non-doms to remit funds into the UK without paying usual taxes’. Wes Streeting, a Labour MP sitting on the Treasury Committee, said that ‘the Government are saying clearly “if you have a trust overseas before the rules kick in, don’t worry; we’re not going to touch that money”.’ He went on to say that he recognised that many are family trusts – and, later still, that he understands the ‘parental instinct’ to want to pass on assets – but argued that there was an unfairness in not applying retrospective changes to non-doms in the same way as different measures affect many others.

Concluding the debate for the government, Stride addressed what he saw as Labour criticisms of offshore trusts, stating: ‘Let me be clear again: if funds are taken out of trusts, they will be taxed in the normal way. In recent years, we have reached important international agreements on the automatic exchange of information to ensure that we can effectively monitor those movements.’ Addressing Streeting’s points, Stride reiterated that funds remitted out of non-dom trusts will be taxable. But addressing the idea of greater parliamentary scrutiny of HMRC – Streeting has suggested the Treasury Committee could look at its work more closely – Stride argued that ‘the idea of politicians getting directly involved in the tax affairs of individuals…would be a dangerous road to go down. I do not want politicians interfering in people’s tax affairs; I want to protect tax confidentiality’.

Under Jeremy Corbyn, Labour will likely return to some of these issues again, possibly at its party conference later this month. For the Conservative government, for now they will move on and publish the draft clauses for the Finance Bill to follow the Autumn Budget this Wednesday, 13 September 2017. The consultation on these draft clauses will be open until Wednesday 25 October 2017.


Simon Hodges is Director of Policy at STEP

Trustees, have you got your LEIs?

Emily Deane TEPThe Global Legal Entity Identification Foundation (GLEIF) has designed a system whereby every ‘legal entity’ will need to register and obtain a unique identification number – a Legal Entity Identifier (LEI) when new European legislation, the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) takes effect in the UK.

If the entity does not obtain an LEI it will not be able to trade on the financial markets in the UK after 3 January 2018.

The London Stock Exchange (LSE) requires investors who are deemed to be legal entities to obtain the LEI, which is a 20-character alphanumeric reference code unique to the legal entity.

Legal entities include trusts, companies (public and private), pension funds (but not self-invested personal pensions), charities and unincorporated bodies that are parties to financial transactions. If the LEI has not been obtained by 3 January 2018, the investment firms will not be able to meet their obligations and provide the legal entity with investment services.

What is the purpose of LEIs?

All LEI data will be consolidated in one database in an effort to improve global entity identification and standardisation, which will enable regulators and organisations to measure and manage counterparty exposure. In addition it will enable every legal entity or structure with an LEI to be identified in any jurisdiction. Once the legal entity has the LEI, it will be required to quote it to the requisite service provider when it enters into a reportable financial transaction. Every financial transaction will require sight of the LEI in order for it to be processed.

Do trusts need one?

The regulations require trustees who are using capital markets in relation to trust funds to obtain the LEI for the trust. We understand that bare trusts may have been excluded from the requirement to obtain an LEI (depending on whether the firm classifies bare trusts as legal entities or as individual/joint accounts) but all other trusts will be obliged to obtain one if they are parties to financial transactions.

In the case of discretionary trusts which have legal restrictions and cannot disclose trust details, the LSE will accept a validation from the trust itself, and will not require sight of the trust deed. However, in all other cases the LSE will generally accept a scanned copy of the first couple of pages of the trust deed in the same way that many banks do for AML compliance. Entities other than trusts are obliged to provide information such as their official registry details and business address.

Issues around trusts

When you apply for the LEI you will be asked to reference the source of its identity, such as Companies House if it is a company registered there. However, there is no equivalent register for trusts. It may be possible to use the trust’s Unique Tax Reference (UTR) from HMRC’s tax return to identify it. This would appear to be a sensible approach for the purpose of minimising the number of LEIs for a trust with multiple funds; however some larger trusts may apply for an LEI covering all of the sub-funds regardless of the UTR. There is still no guidance available on this point.


Every entity will be required to renew its LEI on an annual basis and there will be a charge for renewal. To renew your LEI you must provide the Local Operating Unit with updated information, so that it may verify the data held.

However the FCA update dated 2 August 2017 clarifies that the requirement under MiFID II to renew the LEI on an annual basis applies to firms that are subject to MiFIR transaction reporting obligations, and in the UK, under our implementation of MiFID II, to UK branches of non-EEA firms when providing investment services and activities.

This recent update clarifies that trusts will not need to renew their LEIs on an annual basis unless they want to continue undertaking financial transactions.

What if I don’t apply?

If the LEI has not been obtained by 3 January 2018, investment firms will not be able to provide the legal entity with investment services. The legal entity itself is ultimately responsible for obtaining the LEI, but some investment firms may agree to apply for the LEI on behalf of their legal entity clients. The LSE has produced a draft format which will be acceptable in order to transfer the application authority from the entity to a third party such as a management company, if preferred.

Registration information

Each Local Operating Unit (LOU) may charge a fee for arranging the LEI and the fee may variable at each Operating Unit. You can find a LOU on the GLEIF website.

For more details on how to request your LEI, see the guides:

Quick User guide (pdf)
Full LEI User Guide (pdf)

It is widely acknowledged that guidance is lacking in this area, and the private client sector is keen to see some more prescriptive guidance in relation to trusts before the end of the year.

Emily Deane TEP is STEP Technical Counsel

Will-writing reforms proposed

Signing Last Will and TestamentThe Law Commission of England and Wales is holding a public consultation on reform of the law of wills. The current law, largely derived from the Wills Act 1837, is understandably antiquated and requires an overhaul. The Commission notes that 40 per cent of people in England and Wales die without leaving a valid will, which often results in application of the unfavourable laws of intestacy.


Significant changes in society, technology and medicine have prompted the Commission to review the wills law. Some of these factors include:

• the ageing population;
• the greater incidence of dementia;
• the evolution of the medical understanding of disorders, diseases and conditions that could affect a person’s capacity to make a will;
• the emergence of, and increasing reliance on, digital technology;
• changing patterns of family life – for example, more cohabiting couples and more people having second families; and
• with more people having substantial amounts of property, clarity about what happens to it after death being more important than ever.


The Commission’s objective is to modernise and improve the current, archaic wills law. Some of the key focus areas include:

More flexibility: This would enable courts, when it is clear what the deceased wanted or intended, to dispense with the formalities of a will. If a particular formality, such as having two witnesses sign the will, had been overlooked or incorrectly administered, new ‘dispensing powers’ would enable the court to validate the will.
Capacity review: It may be necessary to improve the test for capacity to reflect the modern understanding of medical conditions such as dementia. This review could result in the introduction of a new test specifically linked to these conditions, where the testator makes a will with specific new guidance and support.
Statutory guidance: It may be necessary to introduce statutory guidance for doctors and other professionals when assessing whether or not a person has the required mental capacity to make a will. This could reduce the need for lengthy, costly litigation.
Undue influence: New rules should be considered to protect testators from being unduly influenced by another person. In particular, elderly and vulnerable testators should be better protected from fraud.
Testamentary capacity: Lowering the age at which a will can be made from 18 years old to 16. A child of 16 or 17 might have significant assets that he or she may not want to pass to an estranged parent under the rules of intestacy.
Electronic wills: It may be necessary to review how technology can be adapted in relation to making a will; it may become easier, cheaper and more convenient to a testator if they are able to do so electronically, though some practical challenges will need to be considered.
Ademption: The Commission would like to encourage discussions as to whether or not the ademption rules need to be reviewed. The rules could be improved to better align the testator’s wishes and intentions with the operation of the law.

Consultation events

STEP is working closely with the Law Commission and the Association of Contentious Trust and Probate Specialists (ACTAPS) on this consultation project. STEP is hosting free consultation events in London, Newcastle and Manchester, and STEP members are invited to provide feedback to Commission representatives.

Consultation event schedule:

London, 13 Sep
Newcastle, 18 Sep
Manchester, 18 Oct

The consultation closes on 10 November 2017, and the Commission’s conclusions, along with its final recommendations and a draft Bill, are expected to be published in early 2018.

Emily Deane TEP is STEP Technical Counsel

Foreign domiciliaries – what next?

UK passport

Early in July, the UK government offered some clarity about what will happen to its proposed changes to foreign domiciliaries, which were dropped from the Finance (No.2) Bill 2017 in the rush to pass legislation prior to this year’s general election.

Following the election and the Queen’s Speech, a Ministerial Statement announced that, after the summer recess, everything that did not make it into the eventual Finance Act 2017 would be reintroduced in a second Finance Bill 2017.

Briefly, the main changes are:

  • If a person is born in the UK with a UK domicile of origin, and is resident in the UK during a tax year, he or she will be considered to be domiciled in the UK for all tax purposes.
  • Anyone who has been resident in the UK for at least 15 of the previous 20 tax years will be judged to be a long-term resident and domiciled in the UK for all of his/her tax purposes.
  • Inheritance tax will be extended to cover:
    • any UK residential property owned by foreign domiciliaries via a non-UK company or partnership;
    • any UK trust settled by foreign domiciliaries via a non-UK company or partnership; and
    • a loan, if the funds are used for the acquisition, maintenance or enhancement of an interest in UK residential property, as well as the collateral on such a loan.

Reliefs and protections

In addition, the government plans to introduce several accompanying reliefs and protections, including:

  • Capital gains tax (CGT) rebasing relief on assets held directly by individuals applying to income gains from non-reporting funds, as well as on capital gains on foreign assets.
  • A cleansing relief for individuals who have been remittance basis users in at least one tax year between 2008/2009 and 2016/2017 with mixed-fund bank accounts. This measure excludes formerly domiciled residents.
  • The protection of settlor-interested trusts, as long as the settlor is a long-term resident of the UK, through the continued disapplication of the capital gains tax anti-avoidance provision that would otherwise have levied a charge on the trust’s foreign income.
  • A small number of relaxations to Business Investment Relief.

The government has stated that there are no plans to alter the implementation dates of any of the measures. If they are passed, they will represent the most significant set of changes to the rules regarding foreign domiciliaries since 2008.

Time scales

Given that Parliament does not return until 5 September, rising on 14 September for the party conference season, it is unlikely that MPs will be able to properly debate the second Finance Bill 2017 before October. If so, the legislation would likely receive Royal Assent in late November – at the earliest.

Given the limited time MPs will have to debate and pass the Bill, and the important changes it will bring, STEP will carefully monitor developments as they happen, and provide updates on the legislation’s progress.

Daniel Nesbitt, Policy Executive, STEP