Registering a Trust with the HMRC Trust Registration Service

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The deadline for registration is 1 September 2022

The HMRC Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. It was set up as part of an EU anti-money laundering directive aimed at combatting money laundering, serious crime, and terrorist financing. Each EU member state has a similar register, and the UK agreed to maintain the TRS as part of the Brexit Withdrawal Agreement.

It is now a requirement that certain trusts are registered such that HMRC have details of the beneficial ownership. Although this has taken several years to bring about, but the deadline for such registration has now been set as 1 September 2022.

Which trusts need to be registered?

Any trust that is considered to be a UK resident “express” trust that was in existence on or after the 6th October 2020 even if it has since been brought to an end must be registered. Generally, an “express” trust is one created deliberately by a settlor rather than by operation of law or a decision of a Court.

A “UK resident” trust is one where all the trustees are UK resident and/or where there is a mix of UK resident and non-resident trustees and the settlor of that trust was either UK resident or domiciled in the UK when the trust was created or when additional funds were added.

Trusts arising under a Will, where the testator (the person making the Will) has died and the trust created by the Will continues beyond two years of their death also need to be registered.

There is a legal obligation and responsibility on the trustees to register such trusts and the failure to do so could result in the trustees being fined.

Trusts that fall into the following circumstances must register with the TRS:

  • New trusts created after 6 October 2020 regardless of the value held, unless excluded elsewhere;
  • All trusts that have a UK tax liability such as income tax, capital gains tax, inheritance tax or SDLT;
  • Trusts of property held for a surviving spouse under a Will (once the initial two year period has expired);
  • Bare Trusts: a grandparent holding a building society account for a grandchild is registerable but a parent holding an account for a minor child would not; and
  • Co-ownership trusts where there are different legal owners/trustees to beneficiaries – for example two people holding a house for themselves and another person.

Which Trusts do not require registration?

There are exclusions from the requirement to register, which include (but not limited to) the following:

  • Trusts for “bereaved minors” and “Personal Injury Trusts” and “vulnerable beneficiaries” including a bank account for someone lacking mental capacity;
  • Will trusts created on death which end within two years of the death;
  • Trusts holding life insurance or retirement policies that only pay out on death, terminal illness or on disability;
  • Charitable Trusts;
  • Co-ownership Trusts where the legal owner and beneficial owner are the same; typically where a house is owned by two people;
  • UK registered pension schemes; and
  • Trusts created before 6 October 2020 with less than £100 although if additional funds are added later then that will trigger the requirement for registration.

When must new Trusts be registered by?

New trusts created after 6 October 2020 have to be registered within 90 days of creation unless exempt.

The deadline for registration of all trusts that fall into the registerable categories is 1 September 2022.

What information is required in order to register a trust?

The process is done online and certain information needs to be provided in order for the trust to be registered. This includes details on settlor, the trustees, the beneficiaries and any named beneficiary rather than a class of beneficiary such as grandchildren. It isn’t a matter of public record but in certain circumstances interested parties can access the information.

Who pays for the cost of registration?

That depends and raises some difficult issues. Several trusts only contain property: there is very little capital available, or income so it follows that the person who gets the benefit of the trust, usually the life tenant, will become the person who needs to pay for the cost of registration. Typically they are a trustee in any event and as such caught by the legal responsibility to register the trust.

As a general rule trust expenses can be split into both income and capital and usually a line is taken between the two in terms of the responsibility. That of course presupposes that the trust does have an element of both income and capital which can be used for this purpose.

Ultimately, a practical response is going to be needed, not least because if the trust has no capital or income then in practice the person who receives the most benefit probably ought to provide the funds.

Who can register a trust with the TRS?

There are a number of options available. Trustees can register a trust themselves and whilst they are jointly responsible and liable for the penalties of non-registration, they will have to appoint a lead trustee who has to register with HMRC to obtain a Government Gateway user ID and complete the filings online.

Accountants and solicitors can provide the service for trustees and have access to the HMRC’s TRS portal.

What are the penalties for the failure to register?

The Revenue have initially indicated that it will be a “light touch” approach. However, penalties could be £100 for up to 3 months late or £200 if more than 6 months late, but generally they are likely to increase over time, or be a percentage of the tax due.

The obligation to register trusts is not going away. If and when advice (either legal or accountancy) is needed for a trust and the trust is not registered then the trustees are likely to be turned away until registration has occurred.

ALL trustees are obliged to register trusts where they are trustees, the lack of funds within the trust does not absolve them from that liability and the fines will start to mount up. Prompt action is required.

If you need help with registering an existing trust or advice in general about setting up a trust, please contact our Wills, Trusts and Probate Team on 01733 882800 or email [email protected]. A member of our team will be able to able to help you.

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