UK express trusts and some non-UK trusts in existence on or after 6 October 2020 must be registered with the UK Trust Registration Service (TRS) by 1 September 2022.
With the deadline approaching, Elaine Morgan, head of the Trusts and Tax team at Lodders, answers some FAQs to explain the registration process and obligations of a trustee.
What is the Trust Registration Service?
The Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. It was set up in 2017 as part of an EU anti-money laundering directive aimed at combatting money laundering, serious crime, and terrorist financing, and to satisfy the requirements of The Money Laundering and Terrorist Financing (Amendment) Regulations 2019. All UK express trusts liable to pay UK tax were required to register. Each EU member state has a similar register, and the UK agreed to maintain the TRS as part of the Brexit Withdrawal Agreement.
New rules came into force in October 2020 that require all UK trusts, apart from a few exceptions (see below), and some non-UK trusts in existence on or after 6 October 2020, to register with HMRC by 1 September 2022, including trusts that have closed since that date.
Previously, only trusts that paid certain taxes were required to register with the TRS. The new rules have widened the TRS to all UK trusts including ones not liable to tax unless the trust is specifically excluded.
The data on TRS is only available to those with a ‘legitimate interest’, such as law enforcement agencies investigating money laundering and the financing of terrorist activities. HMRC can refuse access where there is a disproportionate risk of exposing the beneficial owner for example to fraud, blackmail, or intimidation.
What are the deadlines for trust registration and updating the TRS?
The deadline and timescales for the registration of existing or new trusts are:
- Non-taxable trusts in existence on or after 6 October 2020 must be registered by 1 September 2022 (even if they are now closed).
- Non-taxable trusts created after September 2022 must be registered within 90 days.
- Changes to the trust details or circumstances must be registered within 90 days of the change.
- Personal representatives (the person(s) responsible for managing the deceased’s estate) need to register with HMRC by 5 October after the tax year when the estate starts to receive income or has chargeable gains on which tax is payable if the estate is classed as complex and/or been administered for over two years.
- The registration deadline for taxable relevant trusts set up before 6 April 2021 is on or before 31 January after the tax year in which the tax liability occurred (or by 5 October after the end of the tax year for a first-time liability to Income Tax or Capital Gains Tax).
- For trusts set up after 5 April 2021 the deadline has been extended to 1 September 2022. Taxable relevant trusts set up on or after 4 June 2022 must be registered within 90 days of the trustees becoming liable to pay UK taxes. This also applies to non-taxable trusts. Once a trust is registered on the TRS the trustees will have 90 days from becoming aware of any changes to update the register.
Which trusts are excluded from the Trust Registration Service?
The full list of trusts not required to register can be found on GOV.UK.
Trusts excluded from the requirement to register, include:
- pension schemes
- charitable trusts
- will trusts that are wound up within two years of death
- policy trusts paying out on death or critical illness
- existing trusts with a value of less than £100 created prior to 6 October 2020
How do I register a trust with the Trust Registration Service?
The lead trustee can register the trust on GOV.UK. It is beneficial to appoint an experienced trust administrator specifically trained to gather the information required to complete the TRS process and register the trust.
What are a trustee’s responsibilities?
Legal responsibility for registration falls on the trustees, and it is a matter for trustees to decide and appoint a lead trustee to do this. Alternatively, trustees can appoint an agent, such as a solicitor, to register the trust.
The trustees are required to keep accurate and up-to-date written records of the beneficial owners, including settlors (the persons who established the trust), trustees, and beneficiaries. The lead trustee is also obliged to keep the register updated each year or when certain specific events occur. HMRC may impose penalties and fines for non-compliance on trustees who fail to comply with the registration requirements.
In addition, trustees must register ‘complex estates’ on the TRS, which are an estate where:
- the total tax liability (income tax plus capital gains) for the entire administration period exceeds £10,000
- the probate gross value exceeds £2.5 million
- the value of the assets sold by the personal representative in any one tax year exceeds £500,000
What information is required to register the trust?
Trustees must enter details about:
- the lead-trustee
- the co-trustees
- the settlor
- the beneficiaries
A complete list of what information is needed is available on GOV.UK
What happens if you do not register a trust with the TRS?
There is a legal obligation for trustees to register the trust, but some trusts are exempted from doing so. If you do not register your trust or keep the details on the register up to date, HMRC enforces penalties. It’s proposed that these penalties are not as severe as the self-assessment penalty regime, and that ‘nudge letters’ will be sent for first offences with a proposed penalty of £100 for any subsequent offences. There will be a similar appeals process to the self-assessment regime. HMRC will enforce more stringent penalties if trustees deliberately ignore the registration requirements.
What do the TRS rules mean for professional advisors?
There could be a compliance risk for advisors who store documents for clients where these trusts need registering. Firms should take steps to check records and write to clients to advise them of the new requirements and steps to be taken. In addition, there may be partners in the firm that are appointed as trustees on these trusts and a note of these should be held by the firm in order that these can be looked at and registered. It will need to be agreed who will cover the costs for this work.
What if the trust does not hold any cash to pay fees or penalties?
It is the trustees’ responsibility to register the trust and keep it up to date. The trustees can appoint an agent to do this on their behalf but there will be a cost to do this. If the trust does not hold cash to pay for this, the trustee or beneficiary can lend money to the trust.
Do I need to list all beneficiaries?
HMRC wants an accurate picture of who can benefit from a trust. Where a beneficiary is named on a trust instrument – separate from members of a named class – they can clearly be determined, and trustees must provide the relevant information.
Where a beneficiary is un-named – being only part of a class of persons – a trustee will only need to disclose the identities of the beneficiary when they receive a financial or non-financial benefit from the trust.
Consideration should be given in future drafting to reduce the number of named beneficiaries in deeds where possible.
What trust changes must be recorded on TRS?
The register must be updated if the trust becomes liable to Income Tax trust or Capital Gains Tax, or if there are any changes to trustees’, beneficiaries’ or settlors’ details. Changes must be recorded on TRS within 90 days to avoid fines and penalties.
Do offshore trusts have to be registered with TRS?
Offshore trusts must be registered if they have at least one UK resident trustee. This also applies to non-UK registered trusts that acquire land or property in the UK. Trusts already registered in another EU Member State are automatically exempt from UK registration.
Do all estates need to register on the TRS?
Estates where the administration has continued for more than two years, and complex estates, need to register on the TRS. A complex estate is an estate that does not meet the conditions for using the informal payment procedures. In estates where there are underlying trusts, the dates for registration vary so it is advisable to seek professional legal advice.
Who can ask to see details on the TRS?
Details of the register will only be released in certain circumstances to those with a ‘legitimate interest’, such as law enforcement agencies where there is evidence of money laundering or terrorist financing activity. Beneficiary information will not be disclosed if there is a risk of fraud, kidnapping, blackmail, extortion, harassment, violence, or intimidation, or where a beneficiary is a minor, or otherwise legally incapable.
Who do you need to tell that the trust is registered with the TRS?
Third parties are required to have formal confirmation that the trust is registered and up to date on TRS before they can act for you. For example, if you wish to sell a trust property the estate agent and conveyancer will need to see evidence in the form of a certificate downloaded from the register.
What are trustees’ ongoing responsibilities?
Trustees and their agents will need to ensure that the details of trusts registered with TRS are kept up to date. There will be no penalty for a first offence of failing to keep TRS up to date on time, unless the failure is shown to be due to deliberate behaviour on the part of the trustees.
However, where failure to keep the information up to date is due to deliberate behaviour on the part of the trustees, HMRC has stated that it may charge a £5000 penalty per offence.
More information:
Elaine Morgan is head of the Trusts & Tax team at law firm Lodders. With extensive specialist knowledge in Trust management and advice, particularly working with high-net-worth clients, Elaine specialises in administering the trusts set up from landed estates and family trusts, undertaking pre-death and administration tax on estates matters, and advising on capital gains and IHT implications and associated tax liabilities.
Useful links:
Trust Registration Service Manual (GOV.UK)
Register a trust as a trustee (GOV.UK)
The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (Legislation)
Our fees for registering a trust with the Trust Registration Service are £500 + VAT for existing clients, and £750 + VAT for new clients.
Update, Monday 8 August: The HMRC have amended the penalty regime for TRS as follows:
The failure to register or keep information up to date may lead to a financial penalty but trustees may appeal any penalties charged. Details of the appeal process will be set out in any penalty notices issued.
There will be no penalty for a first offence unless there is evidence that the failure is due to deliberate behaviour on the part of the trustees. Where a failure to register is due to deliberate behaviour on the part of the trustees, a £5000 penalty may be charged for each offence, including (for a failure to keep information up to date). The guidance also sets out how HMRC may respond when it becomes aware of any failure to register or update information on the TRS.
Further useful links:
https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm80020
https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm80030
Update: Friday 10 March:
What are my obligations now 1 September 2022 has passed?
Even though the deadline date of 1 September 2022 has passed the registration of all UK trusts by the trustees (unless covered by an exemption) are still under a requirement to register trusts when they become aware of any that have not previously been registered.
It is often when a third party is employed to undertake work on behalf of the trustees that it comes to light that the trust is not registered as they are required to ensure they have proof of registration of the trust on the TRS. If the trustees fail to provide this then discrepancy reports must be submitted to the HMRC.
Currently HMRC are imposing fines of up to £5000 for deliberate non-reporting although where it can be seen that it was a genuine mistake it is likely that a a reminder letter will be sent to the trustees to register the trust.
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