Important change to the registration of Trusts

For some time, it has been a requirement for certain Trusts that generate tax consequences to be registered with the Trust Registration Service (TRS) to comply with their reporting obligations.

New rules were introduced on 6 October 2020 as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD). This extends the scope of the HM Revenue & Customs (HMRC) TRS to all UK express trusts* and some non-UK express trusts that were in existence on 6 October 2020 or created post that date. An express trust is a trust created deliberately by a settlor. This will most commonly be in the form of a written document such as a trust deed or declaration of trust. Express trusts can be created during a settlor’s lifetime, or by will, to take effect on the settlor’s death.

Previously, only trusts that incurred a tax liability were required to register using the online TRS set up in 2017. However, with the latest change, all express trusts* are now required to register, regardless of whether the trust has any tax to pay.

Under the new rules, organisations and persons involved in preventative work in the field of anti-money laundering, counter-terrorist financing and associated offences will be able to request access to details on the register about the people associated with a trust. HMRC have stated that they will only release the information on request and in certain limited circumstances.

4th May 2022

What are the deadlines?

HMRC has confirmed that the deadline for registering existing non-taxable trusts is 1 September 2022.

Any non-taxable trust created after 1 September 2022 will have 90 days to register.

Where a trust is created or becomes liable to register in the 90 days immediately prior to 1 September 2022, the trust must instead register within 90 days of the date of creation.

The trust must keep the record on the TRS up to date. You must notify HMRC of any changes to the trust details and/or circumstances within 90 days.

What information is required?

In addition to basic details about the trust, such as the trust’s name and date it was created, HMRC will also require personal details for the ‘beneficial owners’ of the trust.   For the purposes of the TRS, beneficial owners include the settlors, trustees and beneficiaries of the trust. The personal details required include the following:

  • Name
  • Date of birth
  • National Insurance number
  • Address
  • Nationality
  • Country of residence

If a trustee is registering a trust, they will also need to set up a Government Gateway account for the trust to complete the registration process.

Are there penalties for non-compliance?

HMRC have stated that they will not automatically charge penalties for late TRS registrations/returns. However, they will be a taking a pragmatic and proportionate approach in determining whether to issue a penalty in each case.

Failure to register a trust or update the trust’s TRS record within the above deadlines could potentially result in the following penalties, chargeable on the lead trustee:

(a) registration made up to three months from the due date – £100 penalty

(b) registration made three to six months after the due date – £200 penalty

(c) registration more than six months late – either 5% of the tax liability or £300 penalty, whichever is the greater sum.

HMRC have also said that a penalty will not be payable if they are satisfied that a trustee took reasonable steps to comply with the regulations.

What happens after a trust is registered?

Upon processing the trust’s registration, HMRC will issue a trust reference number to the lead trustee.  For a taxable trust this will be in the form of a 10-digit Unique Tax Reference (UTR), and for a non-taxable trust, there will instead be a 15-digit Unique Reference Number (URN).

It’s possible that a trust already has a UTR if it was declared to HMRC using the now obsolete Form 41G. This does not affect the trust’s requirement to register under the new rules, and in these cases, the trust’s UTR will need to be disclosed during the registration process.

As above, the trust must keep the TRS record up to date – and this is the responsibility of the trustees. In addition to notifying HMRC of any changes to the trust’s information, if the trust is liable to tax for any tax year, trustees must submit a declaration via the TRS to confirm that the trust’s information is complete and up to date.

If a trust ceases or is wound up, a final declaration needs to be submitted via the TRS to confirm that the trust’s information is up to date and that the trust has come to an end.

How can Old Mill help?

Old Mill can act as a trust’s tax agent and can therefore register a trust on behalf of the trustees. Subject to authorisation from the trustees, when required we can also update the trust’s information and complete the annual declarations.

Old Mill is currently writing to existing clients where we believe there is an association with a trust that now requires registration under the new rules.  The trustees will be given the choice of either instructing Old Mill to complete the registration on their behalf or completing the registration themselves.

If, as a client, you are the trustee of a trust that you think we may not be aware of, please do get in touch so that we can advise accordingly.

If you are a trustee and would like assistance in registering your trust or keeping the trust’s TRS record up to date, please do not hesitate to get in touch with your usual Old Mill contact or a member of our dedicated trust team.

*Please note, there are a very small number of exceptions. Therefore, the above is for guidance only and does not incorporate every possible scenario.