In 2017, the government adopted EU money laundering legislation and, as a result, the Trust Registration Service (TRS) was created. At that time, only those Trusts with a tax liability had to register. From 6th October 2020, the registration requirement was extended to cover the vast majority of Trusts and then on 1stSeptember 2021 HMRC announced they would add non-taxable Trusts to the Trust Register, with a 12-month deadline to meet the registration requirements. This means that existing Trusts must register by 1st September 2022, with new Trusts created after 5th June 2022 having to register within 90 days of their formation. In addition, any Trust changes must be updated on the Trust Register within 90 days of the change.
Trusts that now need to register include: those holding investment bonds;
those holding properties in which beneficiaries are living; and those where the beneficiary receives income directly rather than it flowing through the Trust.
Trusts will have to register names, dates of birth, contact details and national insurance number of the lead trustee, nationality, and country of residence. Tax liability is now not just limited to income tax or capital gains tax, but also includes stamp duty land tax and Scottish and Welsh equivalents, inheritance tax and stamp duty reserve tax. Indeed, even if there is no tax liability, the Register now includes Express Trusts, which are created by a written deed. A full list of the types of Trust that have to register – and those which don’t – is available here.
That’s the bad news. The (relatively) good news is that HMRC has acknowledged that, “The requirement to register with the Trust Registration Service is a new one for many trustees, and we anticipate some trustees will remain unaware of the obligation to register once the deadline has passed. Penalties for failing to register or late registration will only be charged where it can be shown the failure was deliberate.”
In other words, if you are involved in a Trust then action is required. Perhaps not this day, but certainly you shouldn’t hang about. The accountancy trade press has described this as HMRC taking a ‘soft-approach’ to registration. In practice, this means that if HMRC discovers a Trust has not been registered by the relevant deadline – either because that Trust has registered late or because HMRC has identified that Trust’s existence by other means – HMRC may issue a warning letter to the trustee or agent.
If your Trust is not yet registered, the trustee or agent should register it at that point. If the trustee or agent fails to register the Trust by the deadline stated within the warning letter, or fails to explain why their Trust is not liable to registration, a penalty may be issued to the lead trustee.
Penalties for deliberate non-compliance will be applied on a case-by-case basis, Examples of the circumstances in which such a penalty might apply include: continued failure to register a trust following repeated warnings; or providing details on a given trust that are deliberately inaccurate accompanied by continued failure to amend those details. HMRC has also made it clear that where failures to register are due to deliberate behaviour on the part of the trustees, a £5,000 penalty may be charged per offence.
So far, so clear, but it should be noted that
- many trustees are unaware of this new compliance obligation, and
- registering a trust on the TRS is not entirely straightforward.
How we can help
As Fife’s leading independent tax specialist, M&S Accountancy & Taxation can assist in the completion of your Trust’s TRS registration, even if we are not one of the trustees. In addition, we can advise on all Trust administration and tax compliance issues that relate to UK Trusts, as well as their creation, amendment, and termination. With the increased compliance requirements for Trusts, some trustees may not have taken advice for some time, so now is the ideal time to do so. You can contact us at this link.
Vivian Linstrom, M&S Accountancy and Taxation Ltd.