HM Revenue & Customs (HMRC) require that all UK Trusts are registered with them using their Trust Registration Service (TRS) by 1 September 2022.
The TRS is a new online service that provides a single route for Trustees and personal representatives of complex estates to comply with their registration obligations under the Money Laundering, Terrorist Financing and Transfer of Funds Legislation.
A Trust needs to be registered with HMRC using the TRS if the Trust becomes liable to tax. This year, HMRC now also require any Trusts that are not liable to the taxes listed below to be registered with the TRS.
HMRC also require that all registered Trusts need to update the Trust Register each year.
Which Trusts should register?
You must register a Trust with HMRC:
* if the Trustees need to get a Unique Taxpayer Reference (UTR) — for example, for filling in a Self-Assessment tax return for the Trust, even if the Trust is on the exemption list
You must register if the Trust becomes, or is liable for any of the following taxes:
* Income Tax
* Inheritance Tax
* Stamp Duty Land Tax
* Stamp Duty Reserve Tax
* Land and Buildings Transaction Tax (in Scotland)
* Land Transaction Tax (in Wales)
The following types of Trusts must register even if they have no tax liability:
* non-UK Express Trusts, like Trusts that:
* acquire land or property in the UK
* have at least one Trustee resident in the UK and enter into a ‘business relationship’ within the UK
If the Trust has a tax liability but this is covered by a relief, you’ll need to register the Trust if your client needs to claim the relief through Self-Assessment.
Trusts that do not need to be registered unless they are liable to pay UK tax
You do not need to register the Trust if any of the following apply, unless it has a liability to UK taxation:
* the Trust is used to hold money or assets of a UK registered pension scheme — like an occupational pension scheme
* the Trust is used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured
* the Trust is holding insurance policy benefits received after the death of the person assured — as long as the benefits are paid out from the Trust within two years of the death
* it’s a Charitable Trust that is registered as a charity in the UK or which is not required to register as a charity
* it’s a ‘pilot’ Trust set up before 6 October 2020 and holds no more than £100 — pilot Trusts set up after 6 October 2020 will need to register
* it’s a co-ownership Trust set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as ‘tenants in common’
* it’s a Will Trust created by a person’s will and comes into effect on their death providing they only hold the estate assets for up to two years after the person’s death
* it’s a Trust for bereaved children under 18, or adults aged 18 to 25, set up under the Will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme
* it’s a ‘Financial’ or ‘Commercial’ Trust created in the course of professional services or business transactions for holding client money or other assets[/su_list]
Other less common types of Express Trusts which are set up for particular purposes are also excluded from registration unless they have to be registered because they are liable to pay tax.
Trusts which are not set up deliberately by a settlor but are imposed by courts or created by legislation, are not ‘Express Trusts’ and do not have to register unless they need to get a UTR to complete a tax return. Examples of these Trusts include ones set up under:
* a court order to hold compensation payments
Some financial products and arrangements with ‘Trust’ in their description, like the Child Trust Fund or Venture Capital Trusts, are not really Trusts, so do not need to be registered.
When to register
Trusts that are not taxable
Non-taxable Trusts that were created on or before 6 October 2020:
The deadline for registrations is on or before 1 September 2022.
Non-taxable Trusts created after 6 October 2020:
Register the Trust within 90 days of it being created or becoming liable for tax, or on or before 1 September 2022 (whichever is later).
Trusts that are taxable
The registration deadline depends on:
* the tax the Trust is liable for
* if it has been liable for Income Tax or Capital Gains Tax before
Taxable Trusts that are created on or after 6 April 2021:
Register your Trust within 90 days of the Trust becoming liable for tax or on or before 1 September 2022 (whichever is later).
Taxable Trusts that were created before 6 April 2021:
Trusts that are liable for Income Tax or Capital Gains Tax for the first time
Register the Trust on or before 5 October in the tax year after the one in which the Trust starts to receive any income, or has capital gains, and becomes liable for Income Tax or Capital Gains Tax.
For example, if the Trust received some interest for the first time in May 2019 (the 2019 to 2020 tax year) and became liable to Income Tax on it, you should have registered the Trust on or before 5 October 2020 (in the 2020 to 2021 tax year).
Trusts that have been liable for Income Tax or Capital Gains Tax before
Register the Trust by 31 January in the tax year after the one in which the Trust receives any income, or has capital gains, and is liable for tax.
Trusts that are liable for other taxes
Register the Trust on or before 31 January in the tax year after the one in which the Trust has any other tax liability, like Inheritance Tax.
If the Trust is liable for more than one tax and both deadlines could apply, you must register it before the earlier of the 2 deadlines.
If you do not register the Trust on time, the Trustee may receive a notification letter reminding them of the obligation to keep the register up to date. If you do not keep the register up to date the Trustee may be charged a penalty.
We can register Trusts with HMRC on behalf of Trustees using the TRS. If you would like to discuss registering a Trust please contact us on 01684 892000 or email us at [email protected].