What is the Trust Registration Service?

The Trust Registration Service is an initiative from HMRC, which operates online only and requires all UK trusts, which declare tax to HMRC, to register using the service.

The service notifies HMRC of trust tax liabilities and creates a central register of the beneficial interests of tax-paying trusts for compliance with Anti- Money Laundering regulations.

However, proposed changes to the service will mean that trusts, which previously did not need to register, will now be caught by the regulations. 

The current position 

When to register:

Under the current rules, trustees must use the Trusts Registration Service if the trust has incurred a tax liability to HMRC, or if the trust is registered for self-assessment.

If the trust is already registered for self-assessment, and the trust incurs UK tax liability, the Trustees should complete the registration process by the 31st of January after the end of the tax year in which the liability falls.

If the trust is not already registered for self-assessment, and the trust incurs UK tax liability to anything but income tax or capital gains tax for the first time, the trust should register by the 31st of January after the end of the tax year in which the liability falls. Where income tax or capital gains tax becomes payable, the deadline is 5th October after the end of the tax year in which the liability falls.

When not to register:

Currently, trustees do not need to register using the Trusts Registration Service if they do not need to declare tax. This may happen if no tax is payable by the trust, tax relief is available or tax is paid directly by the settlor or the beneficiaries of the trust.

The new proposal

The Government has announced that they plan to widen the Trusts Registration Service. The new rules will apply to almost all trusts that are established in writing, and not just those with tax liabilities as is the case under the current rules.

The value of the trust is not relevant and is likely to apply to the following trusts: interest in possession trusts, discretionary trusts, loan trusts and employee ownership trusts.

The following trusts are likely to remain outside of the proposed rules: statutory trusts, jointly owned assets, bare trusts and personal injury trusts (although it is not yet confirmed that all of these trusts will be excluded).

Deadlines

All trusts in existence as at 10th March 2020 and any new trusts formed after this date should register by 10th March 2022. Trusts set up after 10th March 2022 will be required to register within 30 days.

What happens if you fail to register?

It is the trustees’ responsibility to complete the registration process, if required, and not that of the financial advisor or accountant.

Under the current rules there are penalties of between £100 and £300 for late registration, or 5% of the tax owed (whichever is the greater). The new proposals state that there will be no penalty for the trust for an initial failure to register. A letter will be sent to the trustees requiring registration, with penalties of £100 per offence after that.

Where to go from here?

The changes to the Trust Registration Service have been through the consultation process but we still await a date for implementation of the legislation. We will provide a further update once the legalisation has been implemented.