The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into effect in January 2020. These new regulations altered how Trusts are registered with HMRC via the Trust Registration Service (TRS).
New legislation means you may be obliged to register your Trust irrespective of whether a tax liability is incurred
IMPORTANT UPDATE TO TRUSTEE REGISTRATION SERVICE (TRS)
In recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees, there will be no penalty for a first offence of failure to register or late registration of a trust unless that failure is shown to be due to deliberate behaviour on the part of the trustee.
The TRS was created to comply with this legislation and provided a means whereby Trustees notify HMRC that the Trust has tax to pay.
Additionally, in October 2020, new rules came into force which expanded the extent of HMRC’s Trust Registration Service to include specific Trusts irrespective of whether they incur any UK tax liability.
There are now two types of Trusts (there are some exclusions) that must register on the TRS as described by HMRC:
- ‘Taxable Trusts’ – those with a tax liability, for example, income tax, capital gains tax, inheritance tax
- ‘Express Trusts’ – created via a ‘legal instrument in writing, commonly associated with transferring (conveyancing) title to the property.’ These include ‘Lifetime Trusts’, also known as ‘Family Protection Trusts’ or ‘Asset Protection Trusts’. These differ from Will Trusts, which are created on your death. Lifetime Trusts are formed directly, and your property is gifted to the Trust, enabling you to remain in your home.
(It is also worth noting here that with rapidly rising property values, a Lifetime Trust may, over time, attract unforeseen tax liabilities and other charges if, for example, your property value increases so that it exceeds the applicable inheritance thresholds. Check regularly that your arrangements are still appropriate.)
‘Express’ Trusts (‘Lifetime Trusts’, ‘Family Protection Trusts’, ‘Asset Protection Trusts’) must register on the Trust Registration Service unless excluded
These new rules mean that a Trust of this type that already exists should have been registered on the TRS by 1 September 2022. After this date, Trusts must be registered within 90 days of creation.
It is the Trustee’s responsibility to identify if the Trust is required to be registered on the TRS and to provide the required information to HMRC. This information includes those concerned in the Trust (e.g. the person responsible for setting up the Trust, the Trustees, and beneficiaries) and specifics of the Trust itself. A trustee can appoint an official HMRC Agent to complete the process on their behalf.
We are informing our Trust clients now of this change in the rules, as the online TRS portal is now functioning more effectively, and TRS registration will be essential for many of our clients who have:
- ‘Express Trusts’, those with or without a tax liability, apart from those excluded.
- ‘Express Trusts’ are those which are excluded but that afterwards incur a UK tax liability.
- Trusts with a UK tax liability.
If you have a Trust arrangement of this nature, we would like to offer you a free no-obligation review to assess your circumstances and help you understand if you are required to register your Trust with HMRC’s Trust Registration Service (TRS).
Please don’t delay, as the deadline has already passed.
All information and ideas presented are subject to the prevailing tax rules and will be dictated by personal circumstances. You should only use this information as indicative of what may be the case. Full details of the TRS can be found on HMRC’s website. Check back regularly as updates are made frequently.