Modernising Trust Compliance: What Audit-Ready Residency Evidence Looks Like

For trustees, “good governance” used to mean prudent judgment, tidy minutes and well-timed distributions. In 2025, it also means auditable residency evidence. With the UK moving to a residence-based system from 6 April 2025 and ending the non-dom framework, trust structures with UK connections are now being tested against higher evidential standards, especially where settlors or beneficiaries step into or out of UK residence. 

This article was co-written with our Daysium Founding Partners at Trident Tax, with particular thanks to Edward Ullathorne for his insights on how trustees can navigate the new evidential standards.

HMRC has published its new Residence & FIG Regime Manual for SRT-related record-keeping and, tellingly, the sections on record-keeping spell out the kinds of documents it expects to see when residence is in dispute. In practice, it means record of travel schedules, boarding passes/e-tickets, contracts, and proof of presence at a home. The emphasis is on verifiable, contemporaneous records rather than after-the-fact explanations.

The Compliance Handbook is also relevant. It expects taxpayers to make and preserve sufficient records and to apply a higher degree of care for large/complex affairs.

For complex cross-border affairs, which includes cross-border trust families, HMRC expects “more sophisticated systems”. In short: professional trustees must be able to show the systems behind the story. 

This shift from declarations and judgment to auditable documentation is reinforced by international data-sharing, including CRS/AEOI, and HMRC’s data-analytics tooling, called Connect. Together, these systems increase the chance that inconsistent narratives will be challenged. 

From 6 April 2025, the UK IHT regime has shifted from a domicile-based system to one anchored in residence. For trustees, this means that the IHT status of an excluded property trust is no longer “set and forget” at the point of settlement. Instead, the trust’s exposure to IHT will now follow the residence profile of the settlor.

If the settlor is or becomes a Long-Term Resident (LTR) — resident in the UK for at least 10 of the last 20 tax years — the trust will become subject to the relevant property regime, which means that it will become liable to ten-year anniversary charges and, potentially exit charges should the settlor lose their LTR status in the future. Importantly, this change can apply even where the settlor has long since ceased UK residence, and the effect is locked in for a minimum period of three years.

The challenge for Trustees

This creates a new evidential burden: trustees must be able to confirm the residence status of settlors on an ongoing basis. For many long-established structures, this is not straightforward. Some trustees may no longer be in close contact with the settlor; others may find the settlor unwilling to disclose detailed travel or residence data. 

Yet without clear, audit-ready evidence of the settlor’s UK residence (or non-residence), trustees cannot reliably determine whether the trust has drifted into UK IHT exposure — or whether charges must be reported and paid.

When it comes to tax residency compliance, a few key “triggers” currently stand out for trustees. These include:

• UK-resident settlors of settlor-interested trusts: UK-resident settlors of settlor-interested trusts are generally taxed on trust income, including foreign income, and, in broad terms, gains, on an arising basis, unless qualifying for the FIG regime. 
• Distributions and benefits to UK-resident beneficiaries: Capital distributions provided to UK residents from non-resident trusts can trigger beneficiary-level tax charges. Similarly benefits provided to UK residents e.g. rent-free occupation of a property, or an interest free loan can trigger tax charges even if these benefits are not provided in the UK. Evidence of the beneficiary’s UK residence in the year of receipt is therefore pivotal.
• Cross-border beneficiaries and accounts: CRS/AEOI reporting feeds HMRC with third-party data, making inconsistencies visible. Trustees should assume HMRC can see more than before. 

The vital thing to note here is not that of intentional non-compliance but the current danger of assumptions and the cost of triggering an investigation. These triggers and requirements for clarification aren’t only applicable in clear cases of intentional non-compliance. 

Take a story from one of our advisors: a tax investigation was launched based on a single credit card transaction. It turned into months of scouring for evidence just to show the credit card was used by the person’s family member in the UK, not by the person themselves. 

But trustees can no longer rely solely on the settlor’s word or retrospective explanations. Residency evidence is now a condition precedent to correct tax reporting and sound fiduciary governance. Statements (“I was in Monaco that week”) backed by scattered documents will not stand HMRC scrutiny:

• Missing tickets/boarding passes: HMRC’s own SRT guidance cites tickets and boarding cards (including e-tickets) as core evidence. Without them, you must reconstruct travel from weaker proxies. 
• Gaps in memory & conflicting calendars: HMRC looks for patterns that corroborate presence, such as phone usage records, credit card statements showing day-by-day spend, utility usage consistent with occupation, medical registration at an address, etc. These provide weight when spreadsheets don’t. 
• Consistency across clients: large trustee firms juggle multiple families; an uneven approach makes it harder to show reasonable care was taken in each case. HMRC expects systems commensurate with complexity. 

For trusts specifically, HMRC’s Records to keep for trusts guidance covers the records trustees should maintain and actions if records are lost/destroyed; R185 forms (where issued for income distributions) are part of the typical records set.

As traditional manual methods become weak in face of increasing scrutiny and authorities’ use of sophisticated digital tools, trusts should also look toward tax technology. Trustees can empower themselves with defensible processes. Modern tools like Daysium align neatly with what HMRC asks for.

As Edward Ullathorne notes,

“HMRC don’t just want you to track your days, they want you to evidence them. However, by incorporating the day-count evidence into your day to day movements an individual can systematically produce an ‘enquiry -ready’ file of evidence that can be provided to trustees (and if needed to HMRC) to provide a clear confirmation of residence year by year for settlors and beneficiaries.”

Daysium provides:

• Accuracy – ensuring the trustee can determine with confidence whether the settlor meets the LTR test.

• Protection – mitigating the risk of missed IHT filings, unexpected relevant property charges, or penalties for insufficient care.

• Governance – demonstrating to beneficiaries, regulators and counterparties that the trustee has implemented processes commensurate with the heightened evidential standard.

The win is twofold: lower administrative burden for individuals and administrators, higher defensibility under HMRC’s current playbook.

Leading firms are moving from bespoke, person-by-person “evidence chases” to standard operating models:

• One consistent residency-evidence framework across the book: define what’s collected, such as automated day counts, travel proofs, presence indicators, how it’s reviewed, how long it’s kept, and how it’s destroyed. That maps cleanly to HMRC’s trust record-keeping guidance and cuts risk in enquiries. 
• Data-protection by design: embed controller–processor roles, retention schedules, and secure sharing. ICO’s accountability principle requires you to demonstrate compliance, documenting the governance around personal (including location) data is part of “good trusteeship” now. 
• Proactive client enablement: even when not contractually mandated, trusts who offer or recommend standardised tools signal reasonable care and reduce future friction, especially where settlors’ or beneficiaries’ UK residence flips during a tax year.

As these governance standards become the norm, it’s worth recognising that trustees face different pressures depending on where they sit. The expectations for Channel Islands corporate trustees and UK onshore trustees overlap, but the practical focus diverges in important ways.

While the evidential burden is rising for all trustees, the compliance focus differs depending on whether the trust is administered offshore or in the UK.

Channel Islands corporate trustees (Jersey, Guernsey, etc.)

• Their role is often to preserve the non-UK residence of a trust while administering structures with UK-resident settlors or beneficiaries.
• The UK’s move to a residence-based regime increases the importance of proving settlor and beneficiary residence status in each relevant year, particularly when distributions are made to UK residents.
• Governance expectations mean keeping consistent, audit-ready day count and residency evidence even if the trust itself remains outside HMRC’s direct reporting scope. Doing so demonstrates that the trustee has taken reasonable care to manage UK tax touchpoints.
• Channel Islands trustees gain protection by showing proactive oversight of settlor/beneficiary residency, even if not subject to HMRC’s onshore manuals, but subject to local statutory record-keeping, such as Trusts (Jersey) Law 1984.

UK onshore trustees

• Governed directly by HMRC’s record-keeping requirements, including minutes, R185 forms, and retention rules.
• They are more exposed to HMRC audit and enquiry processes, where demonstrating “reasonable care” is not optional but a baseline.
• With settlor-interested trusts now fully taxable for UK-resident settlors and with distributions to UK beneficiaries under tighter scrutiny, evidencing residence year by year is critical to defend both the trustee’s actions and the beneficiaries’ tax filings.
• UK onshore trustees must evidence compliance directly against HMRC’s manuals and enquiry standards.

For both, adopting standardised digital residency evidence, such as automated day counts, timestamped logs, and secure sharing, offers consistency across families and structures and strengthens audit readiness.

Whether onshore or offshore, the message is clear: residency evidence is no longer optional context but a core part of modern trust compliance. And that means the right moment to adopt processes that stand up to scrutiny is now.

The UK reforms have moved the debate from “what did you intend?” to “what can you show?”. For structures with UK touchpoints, including UK-resident settlors in settlor-interested trusts, UK-resident beneficiaries receiving distributions, and families with cross-border ties, the safest path is to systematise tax residency evidence now. That means automating day counts, preserving corroboration, and sharing it securely in a way that stands up to HMRC’s current scrutiny. 

Ready to modernise your trust governance?

If you’d like to see what an audit-ready residency-evidence workflow looks like in practice, let’s set up a short discovery call. We’ll walk through a simple, standardised approach that fits your existing processes. 

Book a call today.