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Should your trust be registered with the TRS?

10 September 2021
Trust Registration Service

Ola Adeosun, Partner and Senior Wealth Planner

What is the HMRC Trust Registration Service (TRS)?

The TRS was set up in 2017 as a result of the 4th Anti-Money Laundering Regulations 2017 (4MLD), with the objective to improve transparency about the ownership of assets held in trusts. The TRS replaced the old paper form 41G previously used for registration of new trust arrangements. When introduced, the TRS required trustees to register if the trust was liable to pay any of the following taxes: income tax, capital gains tax, inheritance tax, stamp duty land tax or stamp duty reserve tax.

The TRS is a single online route for trusts (and complex estates) to comply with their registration requirements and to obtain a unique tax reference (UTR) in meeting their tax obligations via self-assessment (SA). The legal responsibility for registration lies with the trustees. In the case of multiple trustees, the trustees are required to elect a lead trustee to complete the registration process.

Widening the scope

The subsequent introduction of the 5MLD extended the scope of the TRS to apply to all UK registered trusts and some non-UK registered trusts, regardless of whether the trust has any tax obligations. In other words, the 5MLD has removed the link to taxation as the reason for trusts to register on the TRS. The 5MLD regulations came into force on 6 October 2020.

Trusts that are required to register on the TRS fall into three broad categories as follows:

  1. Unless specifically excluded under the 5MLD, all UK express trusts need to register. An express trust is a lifetime settlement which is deliberately created by a settlor. This captures the majority of trust arrangements familiar to private clients such as discretionary trusts, (simple) bare trusts and nominee accounts, loan trusts, discounted gifts trusts and interest in possession trusts.
  2. Certain non-UK express trusts. This catches non-UK trusts with at least one UK resident trustee which enters into a ‘business relationship’ with an ‘obliged entity’ or acquires land or property in the UK. An obliged entity could be a professional adviser, a financial institution or an accountant.
  3. Non express trusts that have a tax liability would also need to register.

Whilst not a complete list the following trust arrangements do not currently need to register:

  1. Trusts holding life insurance policies do not need to register whilst the life assured is still alive. This exclusion does not extend to trusts that hold life insurance bonds (investment bonds) where the primary objective is investment. Trusts holding life insurance policies continue to remain excluded from registration on death of the life assured provided the funds are distributed within two years from date of death.
  2. Pilot Trust – trusts holding less than £100 and in existence prior to 6 October 2020. A pilot trust established after 6 October 2020, or which have funds added after that date do need to register.
  3. Will trusts – trusts established via a will remain excluded from registration for 2 years from the date of death. If still in existence afterwards or, if any funds are subsequently added then the trust needs to be registered.
  4. Trusts set up under intestacy rules and personal injury trusts set up under a court order.
  5. Trusts for bereaved children under 18, and trusts for ages 18-25 where a parent has died
  6. Co-ownership trusts set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’
  7. Charitable Trusts

It is important to note however, that all excluded trusts arrangements would still need to register in the event they incur a tax liability.

Information required by the TRS

Checklist:

  • Details of the trust’s assets, including addresses of UK properties, and a market valuation of assets held at the date that the assets were settled.
  • The identity of the settlor, trustees, any person exercising effective control over the trust
  • The identities/names of all beneficiaries who are either actual or potential beneficiaries. 

The original deadline for most trust arrangements was March 2022. However, TRS online functionality was such that trustees of non-tax-paying trusts were initially unable to register trusts under the new rules. HMRC has now however confirmed that the TRS is open for non-taxable trust registrations from the beginning of September 2021. In recognition of this delay, the deadline for registration of non-taxable trusts has been pushed back to September 2022.

In due course, trustees will have just 30 days to register and updates will be required for existing information held on the register within 30 days from the date they become aware of the changes.

What next?

The impact of the TRS is far-reaching. Any individuals who have a settlement into a trust or lay trustees of existing trusts should review their existing arrangements and speak to their professional advisers to determine their TRS obligations. HMRC is likely to impose penalties in the event of delays for registering a trust within the required deadlines.

Read more from The Brief.

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