Trust register expansion to non-taxable trusts

HMRC’s Trust Registration Service (TRS) has now been expanded, after several delays, and is now open to non-taxable trust registrations.

Originally introduced by HMRC in 2017, the TRS was part of the UK’s implementation of the Fourth Money Laundering Directive.

Under its initial launch, only certain taxable trusts were required to register where they incurred a specific UK tax liability in the tax year. This includes those with a tax liability under self-assessment (income tax and/or capital gains tax (CGT)) plus those not under self-assessment which incurred one off taxes like SDLT and inheritance tax (IHT).

These trusts are now renamed “Registerable Taxable Trusts” under the TRS and their obligations to keep details updated and make annual declarations by 31 January continues for as long as they are taxable.

Under the Fifth Money Laundering Directive, the TRS is being extended to all express trusts save for a limited number of exempt categories. These are known as “Registerable Express Trusts” and reduced information is required.

This means non-tax paying trusts will now need to register and provide specified information, including the details of trustees, beneficiaries and any UK land or property held by the trust.

From 1 September 2021, the TRS is now open for non-taxable trust registrations. According to HMRC this includes:

• All UK express trusts, unless they are specifically excluded;
• Non-UK express trusts that acquire land or property in the UK; or
• Have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.

Certain trusts do not need to register unless they are liable to pay UK tax. 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 two 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 that were set up before 6 October 2020, and which hold no more than £100;
• Co-ownership trusts set up to hold shares of property or other assets that are jointly owned by two or more people for themselves as tenants in common;
• Will trusts that are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to two 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; or
• Financial trusts created in the course of professional services or business transactions for holding client money or other assets.

Some other less common types of express trusts that are set up for particular purposes are also excluded from registration unless they have to be registered because they are liable to pay tax.

Many trusts will now need to be registered on TRS by 1 September 2022 and this includes trusts set up a number of years ago, which may have been forgotten about but still exist.

It should also be remembered that trusts may switch between the different sets of rules, and this will depend on whether they are liable to pay one of the specific taxes that causes them to be a Registerable Taxable Trust. The information required and deadlines differ, further adding to the complexities for Trustees to consider.

If the trust needs a Unique Taxpayer Reference (UTR) for Self-Assessment purposes, it must still register to get this, even if it is included in the exclusion list for Registerable Express Trusts.

The changes are due to the mix of tackling money laundering and also trust tax relationships with HMRC. The distinction has been hard to draw, and this leads to some trusts being caught which may come as a surprise. Trusts caught in this way, and which need disclosing include:

• Bare trusts (unless they fall within one of the exclusions);
• Trusts holding investment bonds;
• Discounted gift trusts;
• Pilot trusts set up to receive pension death benefits and life assurance;
• All new pilot trusts set up since 6 October 2020;
• Child ISAs (child trust funds are not caught, and it seems child bank or building society accounts are to be excluded but this will not cover Child ISAs or other accounts holding shares for example);
• Co-ownership trusts (such as declarations of trust over property) where the trustees and beneficiaries are not identical. Situations caught include scenarios where the number of trustees differs from the number of beneficiaries. Situations with minors as beneficiaries would be impacted as they cannot be trustees;
• Employee benefit trusts (EBTs) and Employee Ownership Trusts (EOTs) are not exempt and so those in existence on or after 6 October 2020 must be registered by 1 September 2022, including those that have already been distributed; and
• Trusts would up in the period between 6 October 2020 and 1 September 2022 also seem to be caught (unless they fall within one of the exclusions).

Any non-taxable trusts created after 1 September 2022 must be registered within 90 days, plus any trusts which start to have a duty to register like will trusts continuing beyond two years after death. Any changes to the trust details or circumstances must also be registered within 90 days.

Registering a trust

Agents and trustees are being encouraged to register their trust online by following HMRC’s guidance here.

As the 41G form did not collect sufficient information to meet the requirements of this new legislation, those trusts which registered with HMRC before must now use the service to provide the information that is required.

Before a trust can be registered by a trustee, they need to acquire, or already hold, an Organisation Government Gateway user ID and password.

Trustees now have less than eight months left to register these details. Therefore, trustees and companies operating trust or nominee arrangements should consider any trust arrangements in existence on or after 6 October 2020 and ensure they are registered by 1 September 2022.

HMRC recommends that these trustees and their agents familiarise themselves with the TRS system and gather the information required to register well in advance of the deadline.

Failure to register on time could lead to action being taken against a trustee, including potential penalties.

If you need help preparing your trust for TRS registration, please speak to our team today.