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Trustees reminded of registration responsibilities as HMRC deadline looms
Only a few weeks remain for trustees to meet the deadline to register details of their trust with the government as part of expanded trustee reporting requirements.
By 1 September 2022, most trusts are required to be registered with HM Revenue & Customs via the Trust Registration Service (TRS).
The deadline forms part of recent changes that are expected to significantly expand the number of trusts registered with HMRC.
This article provides an overview of the rule changes and what trustees need to do to ensure their compliance. For further guidance, please contact the Vintage Wealth Management expert advisory team.
On 6 October 2020, new legislation was introduced by the government that extended the definition of trust arrangements that must be registered with the government. As a result of the changes, almost all trusts are now required to register by the deadline of 1 September 2022 – even those that have closed since 6 October 2020.
The changes have been driven by the Fifth Money Laundering Directive (5MLD), which aims to support preventative work in the field of anti-money laundering, counter terrorist financing and associated offences. Registration with the TRS is, therefore, a compliance requirement under the 5MLD legislation.
The obligation to register applies to most UK trusts and some non-UK trusts, whether or not the trust has to pay any tax. HMRC defines a trust as a UK trust where all trustees are resident in the United Kingdom or if the settlor of the trust was resident and domiciled in the UK at the time when the trust was set up or when the settlor added funds to the trust. Otherwise, it is a non-UK trust.
Full details of the types of trust that need to be registered are outlined in the TRS Manual.
Broadly speaking, it includes:
- all trusts that are liable for UK taxes, including:
- Capital Gains Tax
- Income Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax
- Land and Buildings Transaction Tax (in Scotland)
- Land Transaction Tax (in Wales)
- all UK express trusts, which are typically created by written deed and are commonly used in the process of estate management and Inheritance Tax (IHT) planning
- non-UK express trusts – if they are set up for the purpose of acquiring land or property in the UK or if they have at least on trustee resident in the UK and enter into a ‘business relationship’ with the UK
There are, however, specific exclusions. This includes trusts used to hold money or assets of a UK-registered pension scheme, trusts holding insurance policy benefits received after the death of the person assured, and charitable trusts. The full list of trusts that do not need to be registered is available via the HMRC website.
It is also important to note that certain financial products and arrangements, such as Child Trust Funds, might have ‘trust’ in their name but are actually a type of tax-free savings account and, therefore, are not required to register. An overview of the common types of trust and their requirements in relation to TRS is available here. https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm10030
The registration process
Trusts must be registered via the Trust Registration Service (TRS) online portal. This can be completed directly by trustees themselves or on their behalf by an appointed accountancy service provider registered as an agent with HMRC. Both instances require a Government Gateway user ID and password.
Vintage Wealth Management can provide full support with registration through our professional network of accountancy practices.
Submissions will include details on the trust itself as well as up-to-date information on the trustees, settlor and beneficiaries. One ‘lead’ trustee must also be nominated to be the main point of contact for HMRC, providing their contact details and National Insurance number.
The TRS separates reporting requirements for taxable trusts and express trusts, meaning there are some instances where both categories will apply.
For trusts with a UK tax liability, trustees must provide information relating to the assets held in the trust, which might include shares, property or particular valuable items, as well as further information on the beneficial owners of the trust. The process of registering via the TRS will generate a Unique Taxpayer Reference (UTR), which is issued to the lead trustee and is required to complete a Self-Assessment tax return. Non-taxable trusts will be issued with a Unique Reference Number (URN) following registration.
The penalty for non-compliance
Technically speaking, failing to register an applicable trust by the 1 September 2022 deadline or failing to ensure the accuracy of details held by TRS related to the trust can result in penalties being issued to the trustees. This includes:
- £100 penalty for registration or updates made within three months of the due date
- £200 penalty for registration or updates made between three and six months of the due date
- The higher of a £300 penalty or 5% of the total tax liability in the relevant year for registration or updates made later than six months after the due date
However, these are not automatic penalties, and HMRC has reportedly indicated that it is taking a pragmatic approach to non-compliance, judging each case on its own context. This might include issuing letters to lead trustees to remind them of their compliance responsibilities.
Registrable express trusts
Non-taxable trusts in existence on or after 6 October 2020 must register by 1 September 2022. This still applies to trusts that have since ceased, with trustees required to register and then able to immediately close the trust record.
Trusts set up or otherwise becoming registerable in the 90 days immediately prior to 1 September 2022 must register within 90 days of the date of creation. The same is true for trusts created after 1 September 2022.
Where a non-taxable trust later becomes a registrable taxable trust, these earlier deadlines for registration still apply.
Registrable taxable trusts
Many of these trusts will already be registered. Registration is required by 31 January (or 5 October in some cases) following the end of the tax year in which the trust had a liability to UK taxation.
Details for all trusts must be kept continually updated via TRS. At the point when trustees become aware of changes to the trust details or beneficial ownership, this information must be amended on TRS within 90 days. Trustees of taxable trusts must declare the trust is up to date annually by 31 January.
The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.
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