The government has introduced new rules that significantly increases the number of trusts which must be registered with HM Revenue & Customs (HMRC). As a result, trusts that have no UK taxes to pay and are commonly used must provide information to HMRC by 1 September 2022. In this article we outline the structures which must now register and the information that must be provided.
The Trust Registration Service (TRS) is managed by HMRC and contains specific information about each trust, including the settlor, the trustees, the beneficiaries, and potentially the assets. It is not a public record but interested parties can access the information in limited circumstances.
The TRS is now the only way to register a trust with HMRC and obtain a Unique Taxpayer Reference (UTR). It is wholly online and there is no provision to register or update using paper documents.
Non-taxpaying trusts which have not previously registered with the TRS must do so by 1 September 2022. From this date, all new trusts required to register (both tax-paying and non-tax paying) must do so within 90 days of creation. Since 1 September 2021 any changes to a trust must be reported online using the TRS within 90 days. The register must be reviewed annually for taxable trusts, even if there are no changes and confirmation of the review should be included on the trust tax return.
Who must register?
- All trusts with a UK tax liability (income tax, CGT, IHT, SDLT/LBTT/LTT, SDRT), whether UK or offshore resident.
- All UK trusts, unless covered by one or more of the exclusions (list below).
- Non-UK resident trusts that have a business relationship with an obligated entity in the UK and at least one UK resident trustee.
- Non-UK resident trusts that acquire UK real estate.
Any trusts that were in existence on 6 October 2020 will need to be registered, even if they have subsequently been terminated.
There are a number of exclusions from the requirement to register, which include (but are not limited to):
- Implied trusts resulting from statute, or the joint ownership of a home or other co-owned assets.
- Trusts imposed by court order.
- UK-registered pension trusts.
- Charitable trusts regulated in the UK.
- Pure protection life insurance policies and those paying out on critical illness or disablement, including group policies.
- Trusts for vulnerable beneficiaries or bereaved minors.
- Bank accounts for children, Child Trust Funds and Junior ISAs (JISAs).
- Client accounts held by solicitors, accountants, etc.
- Personal injury trusts.
- Save-as-you-earn schemes and share incentive plans.
- Maintenance fund trusts.
- Will trusts created on death that receive assets only from the estate and trusts that receive death benefits only from a life insurance policy and are wound up within two years of death.
- Existing trusts holding assets valued at no more than £100 unless/until further assets are added.
In particular, bare trusts, which occur when an asset is held by one person or entity for another, must be registered unless they are otherwise included in the list of exclusions. An investment portfolio held in the name of a parent for their minor child, for example, is a bare trust and must be registered on the TRS (whilst a bank account held by a parent for their minor child is a form of bare trust, this is specifically exempt from registration). Other common examples of bare trusts include partnerships where partnership assets are held by some of the partners for the benefit of the partnership as a whole.
A trust with a UK tax liability will need to register, even if it falls into one or more of the above exemptions.
Penalties for non-compliance
The initial penalty for non-compliance is £100 per failure, but this increases if the failure is not rectified. In addition, there is a risk that wider steps under the anti-money laundering legislation may be taken, particularly if trustees or professionals deliberately do not comply with the legislation. Professionals run the risk of being identified as ‘regularly non-compliant’ with HMRC if they act as trustees for multiple clients that are not registered, which carries very serious consequences.
How do I register?
HMRC has published detailed guidance and there are two main options:
- The trustees can register themselves. Whilst all of the trustees are jointly liable for any penalties, they must appoint a lead trustee who will register with HMRC and complete all of the filings online.
- The trustees can appoint an agent. The appointment still involves the creation of a government gateway account but once appointed the process should be more straightforward.
We are happy to assist clients in establishing whether they have a requirement to register with the TRS and to undertake the filing process if required. For advice or assistance, please get in touch with your usual Saffery contact or speak to Will Leonard, Senior Manager.