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.
What is the Trust Registration Service?
The Trust Registration Service (TRS) is managed by HMRC and contains specific information about each trust, including the settlors, 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 was first set up in 2017, requiring trustees to register if their trust was liable to pay the following taxes: income tax, capital gains tax, inheritance tax, Stamp Duty Land Tax (Land and Buildings Transaction Tax in Scotland) or Stamp Duty Reserve Tax.
New legislation has now come into force, requiring the majority of UK resident non-taxable trusts and some non-UK resident trusts in existence on or after 6 October 2020 to be registered by the trustees on the HMRC's TRS before 1 September 2022. In the majority of cases, this includes Deeds of Trust and Bare Trust arrangements.
Trusts created after 1 September 2022 must register within 90 days.
Who must register?
- All trusts with a UK tax liability, whether UK or offshore resident
- All UK express trusts, regardless of whether they have a UK tax liability, unless covered by one or more of the exclusions (listed 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.
Are any trusts excluded?
Unless they have a UK tax liability, the following trusts are not required to register:
- Implied trusts resulting from statute
- 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'
- 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
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.
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.
Don't forget the declaration
Certain information needs to be kept up to date on the register and any changes must be completed within 90 days.
If the trust is liable to tax for any tax year, you must declare on the trust register that the details of the persons associated with the trust are accurate and up to date. You must do this whether you've made any changes or not.
This declaration is not required if the trust is not liable to tax.
Penalties may apply if this is not completed.
The rules in respect of trust registration are complex. We are assisting trustees with their TRS compliance. Please get in touch with us if you would like any assistance with the TRS.
HMRC's Trust Registration Guidance can be found on the government website here.