Earlier this year the Government made changes to the Automatic Exchange of Information (AEOI) regulations, which will affect some trusts and other entities with income that is mainly (more than 50%) investment income. This is effectively part of the UK’s obligations to share information with other countries/jurisdictions to attempt to mitigate global tax evasion.
Such measures have been in place between the UK and the US for a number of years (under so-called FATCA – the US Foreign Account Tax Compliance Act). However, a similar reporting agreement and structure is in place between the UK and many other countries under the so-called Common Reporting Standard.
There has been very little released to date regarding the AEOI registration requirements, HMRC only updating their guidance within the last fortnight.
However, the registration deadline is very tight and cannot be extended given the international agreements upon which the AEOI regulations are based.
Who needs to register (most relevant categories for our clients)?
All “Financial Institutions” must register with HMRC, even if they have nothing to report under AEOI (typically reports are required where the entity has some form of involvement from/by a non-UK tax resident e.g. settlor or beneficiary for a trust).
Prior to the changes, only Financial Institutions that needed to make an AEOI report/return were required to register with HMRC for AEOI – but this has now, unhelpfully changed.
The registration is a one-off requirement and there is no need to make nil-returns once registered.
What is a Financial Institution?
Entities such as trusts, companies or partnerships (but not individuals) can be “Financial Institutions” for these purposes.
The rules are complex. However, for most clients who do not provide investment services themselves, an entity will generally be considered a Financial Institution where:
50% or more of the entity’s income in the 3 year period ending on 31 December 2024 comes (or the period the entity has been in existence, if shorter) from traded investments and the trust has a discretionary fund manager or a corporate trustee (the latter means that the Trust itself isn’t deemed to be a Financial Institution but is still required to register as a so-called Trustee Documented Trust).
The HMRC guidance incudes some useful examples here.
Most registered charities are excluded from being a Financial Institution for these purposes however, some other not-for-profit organisations should consider their position.
Actions, registration and deadlines
Entities have four actions to complete:
- Check if they meet the definition of a Financial Institution.
- If so, register with HMRC for AEOI by 31 December 2025 (or 31 January following the end of the calendar year they first meet the definition).
- Obtain self-certification from relevant parties to confirm their tax residence status details.
- Notify all relevant parties that their data will be reported to HMRC and may be exchanged internationally.
Registration can be done through HMRC’s AEOI portal.
- For existing trusts, the registration deadline is 31 December 2025.
- For new trusts, the deadline is 31 January following the calendar year in which the trust first becomes a Financial Institution.
Penalties
HMRC guidance sets out 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.
The accountancy and tax professional bodies have liaised with HMRC regarding the approach to penalties. The Association of Taxation Technicians has stated that:
“We have been speaking with HMRC and liaising with other bodies, aware that the 31 December 2025 is a challenging deadline at an already busy period. HMRC are not able to offer an extension to the deadline but they have told us that they will not be issuing late filing penalties automatically.
HMRC have shared the following text with us:
“If you represent Financial Institutions or Trustee-Documented Trusts, please ensure they are registered by this deadline, or as soon as possible afterwards. Late registration penalties will not apply if you have a reasonable excuse for any delay in registering. If you need any support with registering, or think you will be unable to meet the deadline, please email: enquiries.aeoi@hmrc.gov.uk.”
What we suggest
For those entities impacted by this, we’d suggest first seeking assistance from the discretionary investment manager or corporate trustee – being the reason the entity is within scope of the AEOI registration.
Alternatively, we’d suggest attempting to carry out the registration through HMRC’s AEOI portal.
We will be able to assist with the registration in the New Year (after the 31 December 2025 deadline) and can provide a fee quote on request.
