In 2017 HMRC established the Trust Registration Service (TRS) which is a digital platform trustees are required to use to fulfil their registration obligations for trusts.
The main purpose of the TRS is to reduce the risk of trusts being used as vehicles for money laundering. The register includes details of all parties to the trust including the settlor, trustees and beneficiaries.
The onus to register with the TRS and keep the information up to date falls to the trustees.
Trusts which are taxable (ie those with any UK tax liability such as income tax, capital gains tax, inheritance tax, SDLT) should already have registered with HMRC by 31 January following the end of the tax year in which the first tax charge occurred.
What has changed?
HMRC has extended the TRS to include non-taxable express UK trusts following the UK’s implementation of the EU’s 5th Money Laundering Directive (5MLD).
Express trusts are usually created by a written deed and include most trust plans used for estate and IHT planning, such as gift trusts, loan trusts and discounted gift trusts, which do not normally have any tax charges (income tax, capital gains tax or IHT) year on year.
This is because the underlying asset is often an investment bond which allows tax to be deferred until money is withdrawn, although there is the possibility of IHT periodic charges every 10 years or exit charges if the trust assigns the bond to a beneficiary. Other examples include trusts which hold property or shares where no income is received.
Exemptions from registration
HMRC has provided details of certain trusts which do not need to register unless of course, they are liable to pay UK tax and these include:
- 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 – but 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
The deadline for registrations for non-taxable trusts in existence on 6 October 2020 is 1 September 2022. Nontaxable trusts created after 6 October 2020 must register within 90 days of being created or otherwise becoming registerable, or by 1 September 2022 (whichever is later).
Once registered, trustees will have 90 days from when they are aware of any changes to update the register.
Penalties for late registration or late notification of changes
HMRC may issue penalties if the trustees fail to comply with the registration or notification deadlines.
If you have created a trust or are the trustee of a trust which has not yet been registered with HMRC, we recommend that you look at the guidance on HMRC’s website to check if you are caught by the new registration rules.
A trustee can register the trust by following the guidance here.
You will need to create a Government Gateway user ID and password for each trust you want to register.
Want to find out more?
If you would like our assistance with the registration process please contact one of our Trust Specialists by emailing TrustRegistration@mooreandsmalley.co.uk or by filling in the form here.