Do You Need To Register Your Trust with HMRC?
A change to The Trust Registration Service has gone live this month and it could impact you. Under its new rules, many more trusts now need to register with the service, whether they expect to pay tax or not. Here's a guide to the changes and how they could affect you.
HMRC's Trust Registration Service (TRS) was established to meet the UK government's obligations to comply with the fourth and fifth EU Money Laundering Directives (4MLD and 5MLD). In doing so, HMRC have substantially widened the net of people who will be affected.
The TRS is also the mechanism by which trustees notify HMRC that the trust has tax to pay. The TRS must be used to obtain a Unique Taxpayer Reference (UTR) for the trust to complete any tax returns. This applies to both new trusts and any existing trusts which have a tax liability for the first time.
The trust register needs to be completed if the trust has UK tax to pay. But to satisfy the latest 5MLD this has been expanded to include many trusts which have no UK tax liability.
From Paper to Online
The Government created the Trust Registration Service (TRS) in 2017, giving trustees and personal representatives a single route to inform HMRC about an associated trust or a complex estate with trust implications. Adapted from a previous paper version, the TRS provides an easier way to comply with trust obligations by registering online.
People associated with a trust are required to register their details with the service, which is accessible to HMRC and other law enforcement agencies in the fight against money laundering.
Originally only trusts that were liable for tax were required to register with HMRC, however, this month that has changed to now include many non-tax liable trusts.
If you are associated with a trust, it's important you understand what the changes
mean for you, and whether you'll need to register your trust online.
If you know all about the changes to trust registration, and how it will impact you, you can
register your trust here.
Or if you're still unsure of how these changes could impact you, read ahead for everything you need to know about the update to the Trust Registration Service.
Why do trusts need to be registered?
Certain trusts are registered as a way to assist in combating anti-money laundering and terrorist financing. In 2017, the Fourth Money Laundering Directive, which is part of EU legislation for anti-money laundering, came into effect, which prompted the UK government to create an improved system that could easily record details of trusts with tax liabilities. The previously used paper form, 41G (Trust), was seen as outdated and was replaced with the Trust Registration Service, a central online register of trusts.
Which types of trusts were required to register when the TRS was created?
The 2017 legislation made it a requirement to register the following types of trusts;
Registrable Express Trusts: In general, all UK express trusts (which normally means a trust that is evidenced in writing) and some non-UK express trusts, were required to register unless explicitly excluded from registration as an ‘excluded express trust’ (see below).
Non-UK trusts were required to register if they have links to the UK, such as having UK-based trustees, acquiring land in the UK, or entering into a business relationship with a UK business.
Registrable Taxable Trust: All UK and non-UK trusts with a liability to UK taxation were required to register, even if not required to register as registrable express trusts. Types of taxation include; Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, and (in Scotland) Land and Buildings Transaction Tax.
Complex Estates: Personal representatives of estates may have had to register the estate in some circumstances where they need to complete and submit a Trust & Estate return for the administration period following a death.
What's new? Which types of trusts are now required to register?
The Fifth Money Laundering Directive has now widened the scope to include non-taxable trust registrations from October 2020, unless the trust is specifically excluded due to its characteristics. This change became live in September 2021 and impacts anyone who has a trust that falls under the newly extended requirements. Trusts that now need to be registered include the following list;
Trusts must be registered if they are liable to pay any of the following taxes; Capital Gains Tax, Income Tax, Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, Land and Buildings Transaction Tax (in Scotland) and, Land Transaction Tax (in Wales)
All UK express trusts: All UK express trusts must be registered with the TRS unless they are specifically excluded.
Non-UK express trusts which UK implications: All Non-UK express trusts that acquire land or property in the UK, or that have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK, must be registered.
Note: If the trust needs a Unique Taxpayer Reference (UTR) for Self Assessment purposes, it must still register to get this, even if it’s highlighted in the exclusion list.
Which types of trusts are excluded from being registered?
Certain trusts do not need to register unless they are liable to pay UK tax. These types of trusts include the following:
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
Other less common types of express trusts which are set up for particular purposes are also excluded from registration unless they have to be registered because they are liable to pay tax.
Trusts which are not set up deliberately by a settlor but are imposed by Courts or created by legislation, are not ‘express trusts’ and therefore do not have to register unless they are liable to tax. Examples of such trusts include a trust:
set up under the intestacy laws when a person dies without a valid will and the assets in the estate are held by a trust before passing to relatives
set up under a Court Order to hold compensation payments
to hold jointly owned assets, such as a home jointly owned with a spouse, partner or relation as ‘joint tenants’, or a joint bank account
Some financial products and arrangements with ‘Trust’ in their description, such as the Child Trust Fund or Venture Capital Trusts, are not really trusts in a legal sense and so do not have to be registered.
When does the trust have to be registered by?
If you have a non-taxable trust which needs to be registered, you must register it by:
non-taxable trusts in existence on or after 6 October 2020 by 1 September 2022
non-taxable trusts created after 1 September 2022 within 90 days
changes to the trust details or circumstances, within 90 days of the change
If you have a taxable trust which needs to be registered, the deadline depends on the tax your trust is liable for.
Trusts liable for Income Tax or Capital Gains Tax: If it’s the first time your trust is liable for either tax, the deadline is 5 October in the tax year after it first becomes liable for these taxes. If your trust has been liable for either tax before, the deadline is 31 January in the tax year after it’s again liable for these taxes.
Trusts liable for other taxes: You must register by 31 January in the tax year after the one in which the trust is liable for Inheritance Tax, Stamp Duty Land Tax or Land and Buildings Transaction Tax in Scotland, or Stamp Duty Reserve Tax.
You must register by the earlier deadline if your trust is liable for more than one tax and both deadlines apply.
Who is responsible for registering the trust?
Trustees are responsible for registering a trust unless they employ an agent, such as an accountant, to do this for them. If you plan on registering as a trustee and there are multiple trustees, you can appoint one person to register the trust and be a point of contact. However, all trustees are still liable to ensure the trust is registered and up to date. You can register your trust here as a trustee.
The trustees of registrable taxable trusts and registrable express trusts are required to keep the information held on TRS up to date. The conditions for registration, and the information required, are different for these two routes.
What information is required to register a trust?
For Taxable and non-taxable trusts you’ll need:
the name of the trust
the date the trust was created
to say if the trust is an express trust or not
details about whether a non-UK trust has a business relationship in the UK
details about any UK land or property the trust has purchased
Taxable trusts may also require further details such as:
the type of trust
details about how it was set up
the trust’s UTR, if it has one
You should be able to find these details in the trust deed and from any correspondence that the trust has had with HMRC.
For more nuanced trusts, such as property and land, deceased settlors, and more, you can find a comprehensive list of what information is required on the government website here.
Who can access the information on the register?
Law enforcement agencies can already get information on the register about a trust and its beneficial owners to help counter money laundering and terrorist financing. The new rules will allow HMRC to give information to an outside party in specific limited circumstances. In addition, trustees will use the register to share their own information with an obliged entity.
The two reasons HMRC would provide this information include;
Legitimate interest requests – individuals and organisations who have an interest in a specified trust because they are, for example, conducting an investigation into suspected money laundering or terrorist financing activity involving that trust may apply for information from the register.
Third country entity requests – individuals and organisations may apply for information on the register about a trust which holds a controlling interest in a non-EEA (‘third country’) company or other legal entity. A ‘controlling interest’ is usually where the trust holds more than 50% of the shares in the entity or can control it in some other way.
We can help
The changes to the Trust Registration Service are now live, and if you are a trustee it's likely that these changes could impact you. We strongly recommend reviewing the changes to see whether your trust needs to registered and completing this well in advance of the deadline date.
If you're a client of Chesterton House, Chesterton House Accounting, or Woolley Beardsleys and Bosworth Solicitors, and you have a trust that we manage or advise on, we'll be in touch with you soon about the change to the Trust Registration Service and the next actions for your trust. If not and you need help, or you have any questions about this article, you can get in touch with us here.
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