British trustees will not file an American form. You can file it for them.

The annual information return of a foreign trust with a US owner. It reports the trust's income, its assets and its distributions. The trust files it so the American owner can satisfy their own reporting requirement.

The trust itself. The instructions state that a foreign trust with a US owner must file Form 3520-A in order for the US owner to satisfy its annual information reporting requirements.

That wording matters. The filing duty sits with the trust, and the benefit of it sits with the owner.

Trustees abroad frequently decline. Nothing in British law requires them to file, and many have never heard of the form.

Any US person treated as owning part of the trust under the grantor trust rules in sections 671 through 679. Ownership in that sense is a tax concept rather than a question of title.

It commonly arises where an American settled the trust, or transferred assets to it, or holds certain powers over it.

Being a beneficiary is a different question. Beneficiaries report what they receive; owners report annually whether or not anything is paid out.

Our article on Form 3520 and foreign gifts covers the receipts side of the same regime.

Larger than most people assume, because it scales. The instructions set an initial penalty for the US owner at the greater of $10,000 or 5% of the gross value of the portion of the trust's assets treated as owned by that person.

Against a £2m family trust, 5% of the owned portion dwarfs the fixed floor.

The charge falls on the owner rather than on the trustees who did not file. That is the asymmetry driving this whole subject.

The route out of the deadlock. The instructions say that if a foreign trust fails to file, the US owner must complete and attach a substitute Form 3520-A for the trust to their own Form 3520, in order to avoid the penalty for the trust's failure.

So you file on the trust's behalf, using the information you can obtain.

That is a real solution rather than a workaround. It is the answer the instructions themselves give.

Its timing differs, though, and that difference catches people out.

The trust's own filing is due by the 15th day of the third month after the end of the trust's tax year. For a trust on a calendar year, that means mid-March.

A substitute return follows a different clock. Attached to the owner's Form 3520, it is due the same day as that form.

Two deadlines, then, depending on who files. Knowing which one applies to you is half the administration.

Not for the trust's own filing. The instructions are explicit that an extension of time to file an income tax return does not extend the time to file Form 3520-A.

The trust needs its own extension, on Form 7004, filed under the trust's employer identification number by the original date.

That requires the trust to have a number in the first place, which is itself a task with a lead time.

Start in January rather than March if the trustees intend to file.

Two, and they matter to the people receiving them. The form includes a Foreign Grantor Trust Owner Statement and a Foreign Grantor Trust Beneficiary Statement. Together they tell each American connected to the trust what the trust reported, so their own returns can agree with it rather than guess at it.

The owner statement must reach each US owner by the same mid-March date, or later where an extension is granted.

Those statements are what let an owner or beneficiary complete their own return consistently with the trust's position.

Without them, people file on estimates, and estimates are where inconsistencies begin.

There is a form for that too. Where US beneficiaries or owners treat items differently from the way the trust treated them, the instructions require Form 8082, the notice of inconsistent treatment. Filing it beats a quiet divergence, because a mismatch the IRS finds is worse than one you declared yourself.

Filing it is better than a quiet divergence. A mismatch the IRS finds is worse than one you declared.

In practice, disagreements usually concern valuation rather than principle. Document the basis of your figure and move on.

A narrow set, and it is worth checking properly. Revenue Procedure 2020-17 exempts certain eligible individuals' transactions with, and ownership of, certain tax-favoured foreign trusts operated exclusively or almost exclusively to provide pension or retirement benefits, or medical, disability or educational benefits.

Revenue Procedure 2014-55 covers certain Canadian retirement plans, which is not the British case.

Where the exemption applies, it removes trust reporting rather than everything. The same instructions confirm it does not affect obligations under the specified foreign financial asset rules or the FBAR.

Our comparison of Form 8938 and the FBAR sets out those separate duties.

Often not, thanks to that exemption, though the answer depends on the scheme rather than on the label. A registered occupational pension operated to provide retirement benefits is the clearest case for relief.

Arrangements that mix purposes, or that hold assets for a wider group, need looking at individually.

We check the scheme rules instead of assuming. Our article on UK pensions under US rules covers the income tax treatment alongside it.

Enough to describe the trust and its year. That means the trust's assets and their values, its income and gains, its distributions, and details of the trustees and the settlor.

Most of that exists in the trust accounts. British trustees prepare accounts routinely, and those accounts answer most of the form.

Ask for the accounts rather than for the form. Trustees who decline to file will often hand over accounts without hesitation.

That single reframing resolves more of these cases than any argument about obligations.

Briefly and specifically. Explain that you must report annually, that you are not asking them to file anything, and that you need the accounts and a note of distributions.

Offer to share what you file. Trustees are usually more comfortable once they know what is being reported about the trust.

Put it in writing and keep the reply, because it evidences the basis of your figures.

Our clients who send that letter every January spend a fraction of what the others do.

Yes, if it intends to file anything itself. Consequently the trustees need an employer identification number before they can submit the form or request an extension under it, and obtaining one from abroad takes weeks rather than days.

Obtaining one takes time from abroad, so start early rather than in March.

However, a substitute return prepared by the owner sidesteps that step entirely. In practice that is usually the faster route for a British trust with no other American dealings.

The first year is always the hardest, because nothing is in place yet. Ownership has to be established, which often means reading a deed drafted decades ago, and the trustees are meeting an unfamiliar request for the very first time.

Then the historic figures matter. Although this form reports one year, the beneficiary calculations look back across the trust's life.

Meanwhile the trustees are meeting the request for the first time and need an explanation rather than an instruction.

Typically we allow three months for a first year and a fortnight for each year afterwards.

It is doable, and the order matters. First establish which years were actually required, since ownership may have begun later than people assume.

Then prepare the substitute returns for those years, rather than waiting for trustees who were never going to file.

Finally, set out the reasonable cause position in writing alongside them. Our note on reasonable cause penalty relief explains what that argument needs to contain.

Above all, do this before a notice arrives. The same facts read very differently once the IRS has written first.

Run this sequence each year, starting in January.

Take an illustrative case. An American settled a UK trust years ago holding £1.5m, and is treated as owning the whole of it under the grantor trust rules.

The trustees decline to file anything American. She therefore prepares a substitute return from the trust accounts and attaches it to her own Form 3520, which removes the penalty exposure entirely.

Had nobody filed, the exposure would start at 5% of £1.5m rather than at $10,000. The figures are illustrative; the arithmetic is why this form gets priority in our catch-up work.

First, assuming the penalty cannot apply because the trustees are foreign. Second, relying on a personal extension to cover the trust's filing.

Third, waiting for trustees to act rather than preparing a substitute. Fourth, treating a retirement exemption as covering every form.

Fifth, filing without the statements and then diverging from the trust's own figures silently.

We establish ownership first, because that single question decides whether this form applies at all. Then we either support the trustees or prepare a substitute return from the trust accounts.

Our US federal return service covers the form, the statements and the beneficiary side in the same engagement, so the figures agree across the family.

Send us the trust deed and the latest accounts and we will tell you who needs to file what.