Trust Registration Service — To register or not to register? That is the question
New regulations mean that the TRS has been extended to non-taxable trusts.
What is the Trust Registration Service?
The Trust Registration Service (‘TRS’) was introduced by HMRC in June 2017 and was initially aimed at taxable trusts.
The TRS is essentially a database of trusts which HMRC has introduced in order for them to have better visibility of trust arrangements.
New regulations mean that the TRS has been extended to non-taxable trusts. The extended deadline for the registration of non-taxable trusts was 1 September 2022, which has now passed.
Trustees should be taking the opportunity to actively review whether a trust in which they are a trustee needs to be registered on TRS. Trustees can of course seek professional help to register a trust.
Which trusts need registering?
Any trust that becomes liable to a UK tax, which includes a broad range of taxes such as Capital Gains Tax, Income Tax, Inheritance Tax and Stamp Duty Land Tax, must register on the TRS.
The TRS has expanded to capture non-taxable trusts if they are a UK express trust, unless the trust is one of the number of exceptions. The TRS has also expanded to include non-UK express trusts that have land or UK property as part of its trust fund or have at least one Trustee in the UK and enter into a ‘business relationship’ in the UK.
Non-resident Trusts must register on the TRS if the trust becomes liable for tax on income coming from the UK or on UK assets.
Are there any exceptions?
In short, yes. There are a number of trusts currently excluded from TRS registration.
According to government guidance, some non-taxable trusts which are exempt from TRS registration currently include the following, but not exclusively:
- a trust that is used to hold money/assets of a UK registered pension scheme, for example an occupational pension scheme;
- a trust that is 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;
- a trust that is holding insurance policy benefits received after the death of the person assured provided that the benefits are paid out from the trust within two years of the death;
- a charitable trust that is registered as a charity in the UK or falls within an exemption and does not need to register as a charity;
- a ‘pilot trust’ that was created before 6 October 2020 and holds no more than a nominal amount i.e. £100 or less. Please note that all pilot trusts set up on or after 6 October 2020 will need to register;
- a co-ownership trust set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as ‘tenants in common’;
- a will trust created by a person’s will and comes into effect on their death providing they only hold the estate assets for up to two years after the person’s death;
- a trust for bereaved children under 18, or adults aged 18 to 25, set up under a will, or on an intestacy, of a deceased parent or the Criminal Injuries Compensation Scheme;
- a ‘financial’ or ‘commercial’ trust created in the course of professional services or business transactions for holding client money or other assets; and
- a trust which has been created via legislation or imposed by a court such as under the intestacy laws or by court order to hold compensation payments, as these are not deemed express trusts. TRS registration will be required however if a unique taxpayer reference (UTR) is needed to file a tax return.
What sort of information do I need for TRS?
Generally, you will need details of the trustees, settlor, each named beneficiary and a description of any class of beneficiaries as well as the details of the trust fund at the date of registration for taxable trusts only.
When do I need to have completed TRS by?
The dates for completing TRS for a trust vary depending on the date of creation of the trust as well as whether it is a taxable or non-taxable trust. The government guidance is very helpful in this regard.
To mention just a couple of useful deadlines:
- Non-taxable trusts that were created on or before 6 October 2020 — should have been registered on TRS on or before 1 September 2022.
- Non-taxable trusts created after 6 October 2020 — to be registered on TRS within 90 days of creation or becoming liable for tax, or on or before 1 September 2022, whichever is the latest date.
- Trusts that are taxable — will depend on a number of factors such as when the trust was created, the type of tax the trust is liable for and if it has been liable for Income Tax or Capital Gains Tax in the past. For example: taxable trusts that are created on or after 6 April 2021 need to be registered within 90 days of the trust becoming liable for tax or on or before 1 September 2022, whichever is the latest date.
What happens after a trust has been registered on TRS?
If a trust has been registered as a taxable trust, then the lead trustee can expect to receive a UTR for the trust by post within 15 working days from HMRC. HMRC will then start to write with reminders for an annual tax return.
If a trust has been registered as a non-taxable trust, then the lead trustee can expect to receive a unique reference number (URN) for the trust by post within 15 working days from HMRC.
Do I need to do anything once TRS has been completed?
Once a trust has been registered on TRS, there is a continuing obligation to keep the TRS register up-to-date. This can be actioned by a Trustee claiming the Trust on the TRS and the register can be regularly maintained such as to record a change in Trustees or to change the status of the trust from non-taxable to taxable.
What happens if I have missed the 01 September 2022 deadline?
HMRC has issued guidance on missing the 01 September 2022 deadline. HMRC recognises that TRS is a new obligation for Trustees and have said that there will be no penalty for a first offence of failure to register or late registration of a Trust ‘unless that failure is shown to be due to deliberate behaviour on the part of the Trustees.’ HMRC has advised that where failure to register is due to deliberate behaviour on the part of the Trustees, a £5,000 penalty may be charged per offence. HMRC has advised it may issue a warning letter to the Trustee(s) or agent. HMRC has advised that non-compliance with warning letter(s) could result in a penalty being issued to the Lead Trustee. HMRC has said that penalties will be considered on a case-by-case basis.
What should I do if I am not sure if my trust needs to be registered on TRS?
The government guidance is vast in this area and is a useful source for an overview on the TRS scheme.
TRS is a complex area to navigate, so if you are a Trustee of a trust or a Settlor of a trust and are unsure if your trust falls within the scope of TRS then you can get in touch with a professional. There are a variety of professionals offering assistance with TRS including solicitors, accountants and chartered financial planners.
If you have any questions on the topics covered in this article, then please contact our trust solicitors.