Trusts Registration Service (TRS): Changes and Deadlines
Following the introduction and UK’s implementation of the fifth Anti Money Laundering Directive (5AMLD) in 2020, further changes have been introduced to the registration requirements of a trust and a 1 September 2022 deadline now applies for many trusts to register.
This essentially means that from September 2022, a significant range of additional UK and non-UK based trusts will need to register with HMRC under the Trust Registration Service (TRS).
Before the 5AMLD, only trusts that had a UK tax liability were required to be registered. Now, trusts required to register with HMRC also include the following (even if they have no tax liability):
- All UK express trusts which were:
- in existence on or after 6 October 2020; and
- not excluded trusts.
- Non-UK express trusts, which were in existence on or after 6 October 2020 and not excluded and which:
- acquire land or property in the UK
- have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK
For easy reference and a handy outlook of deadlines for taxable and non-taxable trusts, we have put together the table below:
What is an Express Trust?
An express trust is a trust created deliberately by a settlor, usually (but not always) in the form of a document such as a written deed or declaration of trust. Express trusts can be created to take effect during the settlor’s lifetime, or by will, to take effect on death. In contrast, trusts that come into being through the operation of the law rather than a clear intent or decision of a settlor to create a trust or similar legal arrangement are not express trust.
What are UK Trusts?
UK trusts are trusts where all the trustees are UK residents; or where at least one trustee is a UK resident and the settlor was a UK resident/UK domiciled when the trust was set up, and/or when the settlor added funds to the trust.
Thus the above require a wide number of trust to now register with HMRC, which were previously not required to do so. Some common examples are listed below:
- Trust between husband and wife: Where the husband owns the investment portfolio or rental property in his sole name, but he has made a ‘Declaration of Trust’ which says he holds 50% of the portfolio or property on trust for his wife. See ‘Co-ownership’ exclusion below.
- Life interest trust for surviving spouse: Where one of the spouses has left assets in a trust at death in which the surviving spouse has life interest with remaindermen left to their children.
- Assets held in trust for minors: Where parents/grandparents hold shares and other assets in trust for minor children.
Certain express trusts are specifically excluded from registration unless they have a liability to pay UK Tax. These included:
- Trust is imposed by statute or created by court order.
- Bank accounts are held in bare trust for minor children or those lacking mental capacity. Exclusion only covers cash deposits thus investments such as stocks and shares are not covered. Note that Junior ISA’s are not trusts so there is no need to register.
- Co-ownership trusts, holding jointly-owned property where the trustees and beneficiaries are the same persons.
- Trusts for vulnerable beneficiaries or bereaved minors.
- Personal injury trusts.
- UK registered charitable trusts.
- maintenance fund trusts.
- Trust holding insurance policy benefits providing the benefits are paid out within 2 years of the death of the person assured. UK registered pension schemes.
- Pilot trusts which were set up before 6 October 2020 for a future use and which hold no more than £100.
- Will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy and are wound up within 2 years of death.
Please note this is not an exhaustive list.
Updating Information of Already Registered Trust
Taxable trusts which had already registered before the change have until 1 September 2022 to update their details for additional information required under the extended Trust Registration Service (TRS).
Changes to reportable information must be updated on the register within 90 days of the change occurring.
Declare Trust is Up to Date
Taxable trusts need to make annual confirmation that the information held on the trust register is up to date. This annual declaration must be made whether there are any changes or not.
If the trust is liable to Income Tax or Capital Gains Tax, this also needs to be confirmed on the trust’s Self Assessment return SA900 that the trust has either:
- updated the details on the trust register
- confirmed that there have been no changes to the trust
If the trust is not liable to tax, no annual declaration is needed.#
Penalty for Failure to Register on Time
HMRC has stated that ‘In recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees, there will be no penalty for a first offence of failure to register or late registration of a trust unless that failure is shown to be due to deliberate behaviour on the part of the trustees.’ TRSM80020
Where failures to register are due to deliberate behaviour on the part of the trustees, a £5000 penalty may be charged per offence.
Important GOV.UK links:
For full details please contact the Elman Wall Tax Team by phone on 0207 7600 5667 or by email at TaxTeam@elmanwall.co.uk