Extended Trust Registration Service – Do you need to register your trust with HMRC?

HMRC have recently extended the scope of the trust registration service and it is now a legal requirement for all trusts to register on HMRC’s Trust Registration Service by 1 September 2022 unless they are covered by an exemption.

Previously, only trusts which had tax liabilities were subject to these requirements and it is believed that as many as one million trusts in the UK will be impacted by this extension to the rules. Trustees will be jointly liable for satisfying their obligations and penalties may be charged for failing to do so.

Below is an outline of the recently expanded scope for registration.

UK trusts

Subject to certain exclusions, all UK express trusts will now have to register.

• Express trust – An express trust is one which is deliberately created by a settlor, usually by document such as a deed or declaration. They include trusts created during the life of the settlor or by will on death and so encompass most UK trusts.
• UK trust – If all a trust’s trustees are UK tax resident, the trust will be a UK trust for TRS purposes. If the trustees are a mix of UK tax residents and non-residents, it will be a UK trust if the settlor was resident and domiciled in the UK when the trust was set up or funds added.

Exclusions apply to trusts where it is expected the information will already be held under existing registration requirements, or where the risk of the trust being used for money laundering or terrorist financing is low. These are listed below:

• Charitable trusts registered as charities in the UK.
• Trusts created by operation of law (eg. trusts created under a court order or on intestacy).
• Trusts relating to joint ownership of property (eg. land or bank accounts) where the legal and beneficial owners are the same.
• Trusts holding assets of a registered pension scheme.
• Trusts holding life or healthcare policies which only pay out on death, terminal or critical illness or permanent disability of the person assured.
• Trusts arising on death under a person’s will unless it is in existence for more than two years after their death.
• Pilot trusts which hold no more than £100 and which are in existence before 6 October 2020.
• Trusts which are required to meet statutory conditions in order to benefit from some beneficial status (e.g. trusts for vulnerable beneficiaries or employee trusts).
• Certain commercial trusts (e.g. relating to bond issues or syndicated loans).
• Trusts required in order to open a bank account for a minor child. Other financial accounts, which are not cash deposit accounts, for example, those which invest in stocks and shares do not qualify for this exclusion.
• Junior ISAs and Child Trust Funds do not involve trusts and are therefore not required to register.

Non-UK trusts

If all a trust’s trustees are not tax resident, the trust will be a non-UK trust for TRS purposes. If the trustees are a mix of UK tax residents and non-residents, it will be a non-UK trust if the settlor was not resident and domiciled in the UK when the trust was set up or funds added.

Non-UK trusts are required to register if they:

• Own UK assets or receive UK source income, and have UK tax liabilities
• Have at least one UK trustee and enter a business relationship with a UK service provider which is within the scope of the UK money laundering rules, such as a bank, investment manager, accountant, lawyer etc.
• Acquire UK real estate. Note that the rules do not require registration of trusts which held UK real estate and were in existence before 6 October 2020.

Registration deadlines

• Taxable trusts must register by 31 January following the tax year in which the trust had taxable income.

• Non-taxable trusts, in existence on or after 6 October 2020, must register by 1 September 2022.

• Non-taxable trusts created after 1 September 2022 must register within 90 days.

• Changes to the information must be registered within 90 days of the change.

A £100 penalty applies where registration is up to three months late, increasing to £200 if between three and six months late. If more than six months late, the penalty is £300 or 5% of the tax liability, whichever is greater.

The mechanics of registration

All trustees are equally legally responsible for the trust, but they must nominate one 'lead' trustee to be the main point of contact for HMRC. The lead trustee will need to have a Government Gateway user ID and password.

Alternatively, the trustees may register through an agent.