AEOI – an update
Following our blog on Trusts and registration for Automatic Exchange of Inforrmation (AEOI) – what’s it all about?, we asked HMRC for some further clarification on which trusts may need to register for AEOI. We are happy to share our questions and HMRC’s answers.
1. A discretionary trust holding an investment bond
Question: An investment bond is held subject to a discretionary trust. The trustees are the settlor and his wife. All parties are UK resident. There is no external management over the unit-linked funds underlying the investment bond.
In this situation, we believe that this trust will not need to register because it is not a financial institution (FI) as the trustees are investing in retail investments with the trustees deciding which unit linked funds to invest in and so this does not amount to discretionary management (IEIM400820)?
This we believe would equally be the case if the trustees invested the funds in retail investments that were collective investments such as unit trusts or OEICs?
The trustees should certify that the are NFEs so that they can deal with other FIs?
HMRC response: I agree. A trust will be required to register for the AEOI if it meets the two conditions at IEIM400800, that is:
A – The trust must be a Financial Entity or an active non-financial entity (NFE) – more than 50% of the trust’s income is attributable to investing, reinvesting or trading in financial assets etc.
See IEIM400770 and IEIM404040
AND
B – The trust must be managed by a financial institution (meaning of managed can be found at IEIM400820 which you have mentioned).
2. A discretionary trust holding an investment bond with a DFM
Question: The situation is as in Question 1 but the trustees nominate a discretionary fund manager (DFM) that the insurance company appoints. Whilst a FI then manages the financial assets of the trust in a case where it has discretion to manage the investments or investment strategy for the assets, the contractual relationship will, in this case, be between the insurance company (who owns the assets) and the DFM. The situation is therefore not covered by IEIM400820 and registration is not necessary?
However, if a DFM was appointed to manage collective investments held by the trust, this appointment would be made by the trustees, and the trust would need to be registered?
HMRC response: Based on what you have explained, I agree with your interpretation. However, as per IEIM400820, it will depend on what is in the agreement between the parties that provides for discretionary management.
3. A discretionary trust holding an investment bond with a professional trustee
Question: An investment bond is held subject to a discretionary trust that has a professional trustee. All parties are UK resident.
The professional trustee is responsible for overall investment decisions and nominates a discretionary fund manager to manage the underlying investments of the unit-linked funds. The insurance company appoints this DFM.
As the funds are invested in unit-linked insurance company funds, no income arises to the trustees.
It is not thought that the trust needs to be registered under AEOI because:
- the insurance company has the legal relationship with the DFM, the professional trustee having only nominated the DFM;
- the DFM is giving investment advice to the insurance company and not the trustees because the insurance company owns the assets in the funds; and
- no income arises to the trustees from the investment bond.
However, registration would be necessary via the professional trustee because this would be a Trustee-Documented Trust (TDT).
Had the trustees appointed the DFM and the trust was invested in income yielding collective investments which the DFM managed, the income from which made up more than 50% of the total trust income, registration would be required by the trust.
HMRC response: I agree. As per IEIM400990, if the trust is an FI and the trustee is a reporting FI, then the trust would be a Trustee-Documented Trust and therefore needs to register by 31 December 2025.
4. A discretionary trust holding an investment bond with a DFM appointed by the professional trustee
Question: The position is as set out in Question 3 but the professional trustee (and not the insurance company) has appointed a DFM to run the investments underlying the investment bond. In this case would the trust need to register as a FI or the professional trustee as a TDT?
HMRC response: The trust would need to register.
As per IEIM400990 – Non-Reporting Financial Institution: Trustee-Documented Trust “the trust itself becomes a Non-Reporting Financial Institution.”
As per IEIM404510 – “All Reporting Financial Institutions and Trustee-Documented Trusts must register for HMRC’s AEOI service.
To meet the conditions of a TDT, the professional trustee should already be registered as a financial institution.
Summary
As can be seen, the requirements around registering for AEOI are complex. Trustees who are in any doubt should seek professional advice.
Trustees who have missed the registration deadline of 31 December 2025 for existing trusts or the 31 January following the calendar year in which the entity becomes a FI that needs to report or a TDT, if later, should consider seeking professional advice and contacting HMRC at enquiries.aeoi@hmrc.gov.uk.
This bulletin is a guide to AEOI and is not definitive. Detailed guidance is available in HMRC’s International Exchange of Information Manual. If trustees are in any doubt about their obligations, they should seek professional advice. The information above is based on Trustee Support Services Limited’s understanding of the legislation as at 30 December 2025.
