The scope of the Trust Registration Service is expanding: what you need to know

The scope of the Trust Registration Service is expanding: what you need to know

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Many of you will have heard by now of HMRC’s Trust Registration Service (“TRS”). The TRS is anchored by the anti-money laundering provisions and requires certain trusts, both UK and overseas, to provide details to HMRC via the TRS. The TRS also replaces the old form 41g, which was used previously to notify HMRC of a new trust having been established and to enable trusts to be issued with a self-assessment taxpayer reference. Now that the TRS is into it’s second year (being 2018/19) we have a little more clarity about how it will work and the consequences for trustees if they are not fully compliant. This is all outlined below.

Who has to register under the TRS?

Well, broadly speaking trustees are only obliged to register under the TRS if the trust has a liability to UK tax. This encompasses income tax, capital gains tax, inheritance tax and stamp duty land tax and applies to UK “express trusts” and non-UK express trusts.

If, however, in any given year trustees do not have a liability, owing to claiming tax relief, then they do not have to register under the TRS. That being said, the scope of the TRS is expanding and express trusts (UK and non-UK), will need to register under the TRS regardless of whether or not they have a UK tax liability. This new law has been introduced by a new EU directive and the UK must implement the new TRS requirements by 10 March 2020.

Trusts that hold property will, like other trusts, only need to be registered if the trustees incur a liability to tax. Therefore, say the property is occupied by a beneficiary, but it is not income, then a requirement for registration will only exist when a taxable event occurs for IHT, CGT or SDLT purposes.

In line with the self-assessment filing deadlines, if the trust is already registered for self-assessment it will need to have completed the registration by 31 January after the end of the tax year in which the trustees have incurred a liability to UK tax. If the trust is not already registered for self-assessment in the UK, then it will need to have completed the trust registration by 5 October following the end of the tax year.

What is an express trust?

HM Treasury published a response to its consultation stating that “The term “express trust” should be taken to mean a trust that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose, as opposed to a statutory, resulting or constructive trust.” For the avoidance of doubt this also includes settlor interested trusts, even though the liability is that of the settlor in this instance, rather than the trust.

What information do you need to provide?

Trusts that are required to register must provide HMRC with details about the settlor, any trust protectors and beneficiaries. Some good news is that the scope of beneficiaries has been amended to only include beneficiaries and potential beneficiaries where they are named or receive financial benefit from the trust. Previously, all potential beneficiaries had to be identified so for example, if the beneficiaries included the settlor and their children all children current and future had to be identified under the TRS. This led to dispute from many, as trusts may be set up for children without their knowledge, for example.

When registering a trust, the following details must be included:

  • The name of the trust;
  • The trust address and telephone number;
  • The date the trust was established;
  • The country where the trust is resident;
  • Details of the trust assets, including addresses of properties, and an estimated market valuation of assets held at the date the assets were settled; and
  • Name, address, date of birth and National Insurance (or passport/ID number if no NI number) – of the settlor, trustees, the beneficiaries (or class of beneficiaries where individual beneficiaries have yet to be determined or identified) and any person exercising effective control over the trust, such as a protector or appointor.

The responsibility for registration of the trust lies solely with the trustees and if a trust is not registered within the specified deadlines, penalties will be charged. It is therefore crucial that trustees are up to date with their filing.

Penalties will not be issued automatically and will be reviewed on a case by case basis. If they are charged because trustees did not register or update the information of the trust, and cannot show HMRC that they took reasonable steps to do so, the penalties are:

  • £100 for registering up to 3 months after the deadline
  • £200 for registering between 3 to 6 months after the deadline
  • £300 or 5% of the total tax liability in the relevant year (whichever is higher) for registering more than 6 months after the deadline

 

If you have any queries about the trust registration service or would like us to assist you with the registration of a trust, then please contact us.

 

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