30th August 2022Trust Registration Service – what you need to know ahead of September 2022 deadline

(UPDATED AUGUST 2022) In September, the Trust Registration Service (TRS) finally opened for the registration of non-taxable trusts. As a quick recap, the regulations were brought into effect in order to comply with a change in the anti-money laundering regulations. In a nutshell, this means any UK express trust which pays income tax, capital gains tax, inheritance tax, or stamp duty reserve tax has been required to register the details of their beneficial owners (i.e their settlor(s), trustees and beneficiaries).

The deadline for the registration of non-taxable trusts is on September 1, 2022.

In this article Marc Brinklow, Trust Assistant Manager explains what you need to know when registering a trust on the TRS, including who needs to register, what you need to include, and key dates.

Who needs to register?

When the TRS was introduced, any express trust (UK or non-UK resident trusts) that incurred a UK tax liability during any given tax year were required to register with the TRS.

However, from 6 October 2020, all express trusts are required to register with the TRS (unless excluded), regardless of whether they have a UK tax liability.

What are the registration rules?

• The registration rules to register are now much broader and include less common arrangements such as:-
  • Bare trusts – assets held in the name of a trustee, where the beneficiary has the right to all the capital and income of the trust at any time if they’re 18 or over.  Although there is no general exclusion from registration for bare trusts, trusts created in the course of opening a bank account for a minor child or person lacking mental capacity are excluded from registration.  This exclusion only extends to trusts created when opening cash deposit accounts: investments (for example stocks and shares) held on trust for the benefit of a minor child will not qualify for this exclusion.

• • Existing Discounted Gift Trusts, loan trusts, gift trusts and any trust holding an investment bond that were in existence on or after 6 October 2020 must register by 1 September 2022.

• • Non-UK trusts must register if any of the following apply:-
    • At least one of the trustees must be UK resident
    • The Settlement has a Unique Tax Reference (“UTR”) and incurs a UK tax liability
    • The Settlement has acquired UK land or property either directly or indirectly on or after 6 October 2020

Which trusts do not need to register (excluded trusts)

The following trusts are not required to register with the TRS, unless they have a UK tax liability;

• UK registered pension trusts
• The trust 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
• The trust is holding insurance policy benefits received after the death of the person assured — as long as the benefits are paid out from the trust within 2 years of the death
• It is a charitable trust that is registered as a charity in the UK or which are not required to register as a charity
• It is a ‘pilot’ trust set up before 6 October 2020 and holds no more than £100 — pilot trusts set up after 6 October 2020 will need to register
• It is a co-ownership trust 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’
• It is 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 2 years after the person’s death
• It is a trust 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
• It is a ‘financial’ or ‘commercial’ trust created in the course of professional services or business transactions for holding client money or other assets

What if you are already registered with HMRC?

The deadline is dependent on when the trust was created, whether it is taxable or not and if the trust is already registered for Self –Assessment (SA) for Income Tax or Capital Gains Tax (CGT).

Maintaining and updating the trust records on the TRS

Even if the trust details remain the same, the trustees will still be required to submit an annual declaration to confirm the details held on HMRC’s record are accurate and up to date. From 2022 onwards, updates will be necessary each time there are changes to the beneficial ownership information, such as trustees or beneficiaries.

The penalties on late registration/annual declaration

HMRC may issue a payment penalty if the trust has failed to register or submit an annual declaration by the deadline.

Please get in touch to see how we can assist or to discuss specific circumstances.