Trusts & Tax Residency Documentation: What Should You Know

Trusts are no strangers to regulatory evolution. But the UK’s 2025 non-dom and related tax reforms represent a sharper strategy shift that puts a spotlight on the quality of tax residency documentation for settlors and beneficiaries. Trustees who continue to rely on outdated and informal residency verification methods may soon find themselves exposed to unexpected tax liabilities, penalties, and audit risk.

Let’s explore why residency documentation is becoming the new battleground for trust compliance and what fiduciaries can do to stay protected.

For trustees, confirming a settlor or beneficiary’s tax residency is rarely as simple as asking where they live. Residency is a technical, multi-factor test that requires careful validation and even more careful record-keeping.

Trustees must now manage the following:

• Precise day counts across multiple jurisdictions
• Supporting receipts, booking confirmations, and travel records
• Inconsistent or incomplete data from clients
• Jurisdiction-specific thresholds, such as the UK’s Statutory Residence Test (SRT), which layers day counts with ties like accommodation and employment

The SRT includes automatic UK tests (such as 183+ days) and complex “sufficient ties” criteria that link day count to factors like having a home, working in the UK, or family presence. Trustees must ensure residency isn’t assessed in isolation as context matters as much as count. A single extra day or overlooked tie can alter the entire outcome of a residency assessment.

Without a structured framework, even experienced trustees risk misclassifying someone’s status and potentially triggering income tax or IHT charges that could have been avoided with proper documentation.

In practice, most trustees still depend on manual methods of tax residency documentation. These often include strategies such as self-declarations, emails from advisors, and a trail of PDFs and spreadsheets. These legacy approaches come with severe limitations:

The result is a patchwork of inconsistent data, over-reliance on trust, and a growing gap between fiduciary expectations and practical execution.

HMRC’s growing investigatory focus means that self-declarations, no matter how sincere, are no longer sufficient. Trustees must be able to demonstrate “reasonable care” and diligence in verifying residency claims. And in the absence of a robust audit trail, it’s the trustee—not the client—who may be left holding the liability.

Consider the key risks:

• Clients forget, misreport, or round up travel data from memory.
• Declared locations may contradict digital footprints available to tax authorities via AI-driven tools like HMRC’s Connect system.
• No systematic way to challenge HMRC’s assertions if data isn’t timestamped, geotagged, and contemporaneously recorded.

HMRC’s Connect system draws from 30+ data sources, including flight bookings, bank records, and even social media. This means inconsistencies between declared residency and real-world data are more likely to be flagged. Without structured and timestamped evidence, trustees may struggle to counter these insights during an enquiry.

In short, if you can’t prove it, HMRC may not believe it.

The standard of “reasonable trustee conduct” is shifting.

Beneficiaries and family offices now expect professional-grade compliance. A signed PDF is no longer sufficient.

Legal advisors and auditors require defensibility in the process by which fiduciary decisions are made.

Regulators are moving toward evidence-based governance, especially under frameworks that remove domicile and rely solely on residency as the basis for taxation.

In this environment, governance lapses invite regulatory scrutiny and risk damaging the trust’s reputation and the trustee’s professional standing among beneficiaries and counterparties.

Tax residency documentation is no longer an administrative chore but a core pillar of trust governance. Professional trustees who lag behind may struggle to defend decisions during future reviews or disputes.

The urgency behind improving tax residency documentation isn’t hypothetical. The  UK’s tax reforms that came to force on 6 April 2025 redefined the landscape for non-doms and the trusts they’re connected to. Trustees must now prepare for a world where residency alone drives UK tax outcomes.

Here are the changes trustees need to know:

• Non-Dom Status Abolished: Domicile will no longer determine UK tax treatment. Instead, UK tax residency alone will be used to establish tax obligations.
• Removal of Trust Protections: With limited exceptions, UK-resident settlors who are not irrevocably excluded will be taxed on all income arising in offshore trust structures, even if they receive no distributions. Even when a UK-resident settlor is irrevocably excluded, gains within the structure may still be taxed on them personally.
• Four-Year FIG Regime: Individuals who haven’t been UK resident for the past 10 years may benefit from a four-year window of relief on foreign income and gains.
• Inheritance Tax Exposure: Anyone resident in the UK for at least 10 of the past 20 tax years will fall within the scope of UK IHT on their worldwide estate, including trust-held assets.

These reforms mark a material shift in trustee obligations. Without clear, defensible residency records, trusts risk being taxed more aggressively regardless of the settlor’s intentions or benefit received.

With UK tax reforms eliminating the remittance basis and removing trust protections from April 2025, trustees face an inflection point. The question is no longer whether you should verify residency but how.

Daysium offers a purpose-built platform to help trustees document, verify, and defend tax residency positions with confidence:

• Automated Day Counting: Real-time tracking via secure phone location data tailored to jurisdiction-specific thresholds.
• Audit-Ready Evidence: Timestamped logs, geotagged documents, and customisable reports—accessible to trustees and advisors.
• Liability Mitigation: By offering Daysium to relevant individuals, trustees can show they’ve taken proactive steps, even if the client declines to use the platform.
• Simple Onboarding: Trustees share a contact; individuals sign up directly under Daysium’s Terms of Business.

Implementing the Daysium approach to tax residency compliance, leaves trusts with the ability to:

• Meet fiduciary duties with less administrative burden
• Avoid unnecessary tax charges through defensible residency documentation
• Reduce reliance on costly advisory work or client self-declarations
• Standardise processes across your book of trusts

There is no simpler, more defensible way to meet your obligations.

In an era of reform and rising scrutiny, fiduciary risk doesn’t come from malice. It comes from inaction. Trustees who rely on manual systems or outdated assumptions about self-reporting for their tax residency documentation are increasingly exposed.

As the UK reforms start showing their true impact in the coming months, the window for implementing robust, automated solutions is narrowing. Proactive trustees who adopt digital tools now will be far better prepared to weather the shift ahead.

Ready to see how Daysium can support your trust governance?

Book a confidential discovery call to learn more.