New compliance requirements for trusts
Lorraine Wilson reports on the introduction of HMRC's new Trust Registration Service.
New compliance requirements for trusts have been introduced.
HMRC’s online Trust Registration Service (TRS) has been live since 2017. Until recently, only trusts with a tax liability have been obliged to register. However, from this year it will be mandatory for the majority of trusts to register with the TRS.
Which trusts must register?
Nearly all trusts will have to register with HMRC via the TRS. This includes existing trusts and new trust created in the future.
HMRC recently published further guidance clarifying which trusts will be exempt from registration:
- Trusts imposed by statute (such as the statutory trust arising on intestacy)
- UK-registered pension trusts
- UK-regulated charitable trusts
- Trusts for vulnerable beneficiaries
- Trusts for bereaved minors
- Personal injury trusts
- Joint ownership trusts (where the trustees and beneficiaries are the same persons)
- Existing trusts holding assets valued at less than £100 unless and until further assets are added; and
- Will trusts created on death that receive assets from the deceased testator’s estate and are wound up within two years of the date of death. All other will trusts must be registered, even if the trust incurs no tax liability.
The recent guidance confirms that ‘pilot trusts’ (trusts which hold less than £100) will not need to register unless and until further funds are added. This is a welcome announcement which will take some of the administrative burden away from trustees of these relatively dormant trusts. Once funds are added (often on death), the trust must be registered.
As part of the Government consultation, consideration was given to bare trusts. Nevertheless, the Government guidance confirms that bare trusts must still register (including existing bare trusts). This will create additional compliance requirements for those trustees.
When must the trust register?
The deadlines for registration are:
- Trusts created before 10 March 2020 must register by 10 March 2022;
- Trusts created after 10 March 2020 must register within 30 days or by 10 March 2022, whichever is later.
- Trusts created on or after 10 Mach 2022 must register within 30 days.
HMRC have the power to impose penalties for those who fail to comply with the new registration requirements.
Updating details on the TRS
Until recently, trustees of registered trusts had to manually report any changes to the trust, such as a change of address or the appointment of a new trustee. Such changes had to be reported in writing to HMRC.
Recent changes introduced in ‘phase 2’ of the TRS mean that trustees can now update the trust’s details more easily online. This is a welcome change which makes updating details quicker and reduces the amount of correspondence to be manually processed by HMRC. However, currently only trusts with a tax liability have an obligation to update details. Changes to trusts without a current tax liability need not be reported yet (but this is due to come in the next phase of the TRS rollout).
Going forward, trustees will have to complete an annual declaration for HMRC. The annual declaration must be completed even if it simply confirms that there have been no changes to the trust in the previous year.
What does this mean for trustees?
Trusts which have previously had little or no ongoing administration will now have additional compliance requirements to satisfy. This will create an administrative burden for trustees, in some cases even where the trust is dormant.
The new requirements act as a timely reminder that being appointed as a trustee carries responsibility and legal obligations.
Some technical issues mean that parts of the system have not yet gone live. That said, trustees can and should be preparing in advance to meet the new requirements.
Trustees should seek professional advice as to whether they need to register the trust and future reporting obligations. Our specialist Trust Administration team can assist with any queries concerning the new compliance requirements and can help you to prepare for the new process.