New requirements have been introduced by the government relating to trusts and the Trust Registration Service (TRS).
Until now, trusts where the trustees have incurred some type of tax liability have had to be registered on the TRS but those trusts where the trustees have had no tax to pay, have so far not had to be registered. This position has been changed by the government so that now any trust, with certain exceptions, that hasn’t already been registered on the TRS must be registered no later than 1 September this year, irrespective of whether the trustees have any tax to pay.
If you are a trustee of a trust that will need to register on the TRS by 1 September 2022 here is some guidance on the steps you must follow.
Trusts that need to be registered:
- all UK express trusts, unless they are specifically excluded (see below) – express trusts are trusts that were deliberately created by the settlor expressly transferring assets to a trustee)
- non-UK express trusts that:
- acquire land or property in the UK
- have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK
Trusts need to be registered if they are liable to pay any of the following taxes: Capital Gains Tax, Income Tax, Inheritance Tax, Stamp Duty Land Tax (or the Scottish or Welsh equivalents) or Stamp Duty Reserve Tax.
Trusts that do not need to be registered:
- trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme
- trusts used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured
- trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within 2 years of the death
- charitable trusts which are registered as a charity in the UK or which are not required to register as a charity
- ‘pilot’ trusts which were set up before 6 October 2020 and which hold no more than £100 – pilot trusts set up after 6 October 2020 will need to register
- co-ownership trusts set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’
- will trusts which are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to 2 years after the person’s death
- trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme
- ‘financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets
How to register your trust
There are two possible options in terms of responsibility for registering a trust:
- The trustees can authorise an ‘agent’ to register the trust on their behalf such as an accountancy service provider, or
- The trustees can register the trust, with one trustee being designated as the ‘lead trustee’ for HMRC correspondence (for most trusts, the registration process is relatively straightforward).
Although we are unable to register the trust on your behalf as our business does not operate as an accountancy service provider, I have provided information below in order for you to register your trust as the lead trustee.
If the lead trustee is registering the trust
If the lead trustee is registering the trust, they must first obtain an Organisation Government Gateway user ID and password if they don’t already have one. This can be created the first time they register. They’ll need a Government Gateway user ID for each trust they want to register. They’ll need to give an email address (this will be linked to the trust’s Government Gateway account) and their full name.
Once the lead trustee has registered the trust, if the trust (trustees) is liable to tax, HMRC will send the lead trustee a Unique Taxpayer Reference (UTR), usually within 15 working days. The trustee will need the UTR to start filing self-assessment tax returns.
If the trust (trustees) is not liable to pay tax, the trustee can get their Unique Reference Number (URN) by logging back into the service following submission of the registration.
The trustee can use the online service to view or make changes to their registered trust. They can get a PDF copy of the report to show proof of registration.
If the trustee wants an agent to view or make changes to the trust’s registration details, they must authorise them to do so.
Once registered there are certain changes that must be updated on the register within 90 days of the change. And if the trust is liable to tax for any tax year, the trustees/agent must declare on the trust register each year that the details of the persons associated with the trust are accurate and up to date even if there have been no changes. If the trust is not liable to tax, there is no need to make an annual declaration.
As per HMRC 2018 guidance a failure to register a trust or a failure to notify any change of information by the due date, can result in the following penalties chargeable on the lead trustee:
- registration made up to three months from the due date – £100 penalty;
- registration made three to six months after the due date – £200 penalty; and
- registration more than six months late – either 5% of the tax liability or £300 penalty, whichever is the greater sum.
HMRC also has the power to apply a penalty for money laundering offences.
I have enclosed links to further guidance provided by HMRC: Register a trust as a trustee and Manage your trust’s details.
Because of the long list of trusts that do not need to be registered we believe few of our clients will have to register their trusts with the Trust Registration Service (TRS) by 1 September but some of them will be affected.
Most clients who have created trusts only have so-called pilot trusts. These are trusts that were typically created with trust documentation and a £10 note attached to each trust deed. These trusts are specifically excluded from trust registration if set up before 6 October 2020 unless you have more than £100 invested in them. Such trusts set up on or after 6 October 2020 need to register regardless of the amount held within them.
The main trusts that will need to be registered by our clients are trusts which are invested in bank accounts, property or investments. Virtually the only trusts registrable are those that are invested in investment bonds.
So if you do have one or more trusts that you think need to be registered with the TRS do get in touch with us because if you do not register before the deadline you will be liable to penalties. You know it makes sense.*
*The value of your investment can fall as well as rise and is not guaranteed. The contents of this blog are for information purposes only and do not constitute individual advice. You should always seek professional advice from a specialist. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.