Trust Registration Service: The new registration requirements
In our earlier article "Farmland & Partnerships: Caught by new trust registration rules" we described how farming families who hold land on behalf of other family members, farming partners and so on, may be caught by the new Trust Registration Service (TRS) rules in a variety of different circumstances. These new rules take effect from 1 September 2022.
We now continue with that theme to describe other types of trust, which are also caught and explain where trustees will need to take action.
By way of reminder, TRS is a register of the beneficial ownership of trusts. Its aim is to provide greater transparency around the ownership of trust assets and to prevent abuse. It requires trustees to register the trusts they administer with HMRC. This process requires certain information to be provided and then to be kept up to date.
Initially, only trusts that were subject to certain UK tax liabilities were obliged to register. The UK Government has extended these rules. HMRC are likely to impose penalties on trustees who fail to comply.
Which trusts must be registered?
All UK express trusts must now be registered on TRS unless they are excluded from registration (see below). As a general rule any express trust that is liable to UK tax must register on TRS.
An express trust is one created deliberately by the settlor of the trust and can either take effect during the settlor's lifetime or on the settlor's death via their will.
Trustees would be wise to assume that they must register unless one of the exclusions applies.
Which express trusts are excluded?
The following are examples of types of trust that do not need to register under TRS under current rules. Please note that this list is not exhaustive.
- Will trusts: created on death, that only receive assets from the estate and are wound up within two years of death. However, if the trusts are still in place after two years they will need to be registered.
- Pilot trusts: holding property valued at no more than £100 and came into existence before 6 October 2020. More recent and new pilot trusts will need to register.
- Bank accounts for minors: trusts created in the course of opening a bank account for minor children or persons lacking mental capacity. This applies to cash accounts only, investments held on trust for the benefit of minor children will not qualify. Note that Child Trust Funds and Junior ISAs are not trusts and therefore not required to register.
- Life insurance policies: trusts of life policies are excluded, provided the policy only pays out on the death, terminal or critical illness or disability. Note that it is important that life policies are written in trust in the first place for Inheritance Tax planning.
- Trusts for bereaved minors or young people (also known as 18 – 25 trusts)
- Registered pension scheme trusts
- Personal injury trusts
- Disabled persons trusts
- Charitable trusts
- Trust maintenance funds for historic buildings
Non-taxable trusts must register by 1 September.
Trusts subject to UK tax must register by 31 January following the end of the tax year in which the trust had a tax liability. If it is the first time the trust is liable to income tax or capital gains tax, the trust should register by 5 October following the end of the tax year during which the trust is liable to income tax or capital gains tax. If a trust is liable for more than one tax then the earlier deadline will apply.
The TRS record must also be updated within 90 days of trustees becoming aware of a change to the trust details or beneficial ownership. If the trust is taxable, an annual declaration must be made by 31 January.
The new rules increase greatly the number of trusts that will need to register and place an additional administrative burden on trustees. We can guide trustees through the complexity of these new rules and avoid penalties.
For more information, please contact Edward Porter.