New rules for Trust Compliance
With a new top tax rate of 39% now in place, other tax rules have also been tweaked to make sure they all align.
Trusts now have new rules on disclosures, in an effort to prevent people from using trusts to avoid paying additional tax.
Previously, trusts have not needed to file financial statements or details of non-taxable transactions. This has now changed. Inland Revenue will now be collecting more information so it can keep a closer eye on how trusts are being used.
Trusts now need to provide more financial information
From April 2021 onwards, all annual returns for trusts will need to include:
- Financial statements
- Details of settlements
- Details of distributions, taxable or not
- Any other information required, like loans and transfers involving associated persons or related parties.
Charitable and non-active trusts are exempt, since they don’t need to file a return.
You can read more about the new taxation bill here.
If this looks daunting, don’t worry, we can help you work out what information is required and how you can supply it. It is vital to make sure you comply with the rules so your trust isn’t declared a sham – if that happened you would lose any advantages that the trust provides.
Compliance costs are increasing
This is a large step up in terms of what trusts must provide in order to be compliant. It’s important that you start collating this information so you can supply it to Inland Revenue. This will probably be time-consuming and may have additional costs, particularly in this first year. Hopefully it will get easier as we all learn to navigate the new rules.
If you have doubts about how to comply, we can answer your questions. It might also be a good time to review your entities and make sure your trust is working for you.
Give us a call, drop us a note or text us – we’re here to help!