New requirements for non-taxable trusts to register with the Trusts Registration Service
The Trust Registration Service (“TRS”) is a central register of the beneficial ownership of trusts. The TRS was initially set up in 2017, requiring Trustees to register if the trust was liable for either Income Tax, Capital Gains Tax, Inheritance Tax and Stamp Duty Land Tax. The information reported on the Register was accessible to HMRC and other law enforcement agencies, but not third parties.
New rules were introduced on 6 October 2020 to extend the requirement to all “relevant trusts”, defined under Regulation 42 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as either:
- a UK express (in writing) trust
- a non-UK express trust which receives income from a source in the UK or has assets in the UK which are liable to pay one or more of the taxes referred to in the above paragraph or
- any other non-UK express trust, which is not specifically excluded further on in the Regulations, and either acquires an interest in land in the UK or enters into a business relationship with a relevant person where at least one trustee is a UK resident and the trust is not an European Economic Area registered trust.
The capability for these types of trust to register became available at the beginning of September 2021, with guidance being released by HMRC regularly as queries were raised as to the interpretation of the Regulations and the types of trusts that do and do not need to be registered.
Trustees are under a positive obligation now to consider whether the trust is registerable under the new rules and see to it that the registration is dealt with, as penalties can be imposed in the event that HMRC are aware of a trust that is registerable but the Trustees have not done so. Given that this is the first year that Trustees are required to consider this and not all Trustees will be aware of the obligations, HMRC will be taking a pragmatic approach as to issuing penalties for late registration. However, this does not mean that Trustees will be able to simply sit back and wait; it is imperative that all Trustees consider their obligations now to avoid any headaches later.
Which types of trust are required to register with TRS?
- Discretionary trusts – subject to some exclusions, discretionary trusts are required to be registered. Examples of discretionary trusts include “nil rate band loan trusts” which were set up before it was possible to transfer inheritance tax nil rate bands between spouses. If they were taxable trusts (i.e. the trusts had received income which was reportable to HMRC), then the requirement to register the trust came into effect in 2017.
- Express trusts – most trusts are express trusts, and again, subject to exclusions, are required to be registered.
Which types of trust are not required to register with TRS?
- Bereaved minor trusts – these are typically trusts created on intestacy, i.e. where someone dies without leaving a Will or part or all of the residue given under a Will fails as there are no beneficiaries capable of receiving the monies. Whilst bereaved minor trusts do not have to register on TRS under the new requirements, they are required to do so should they have a UK tax liability.
- Disabled persons trusts – if the trust is set up for the sole benefit of a disabled person or persons, they do not have to register (unless they have a UK tax liability). However, if there is discretion to pay to other beneficiaries, then the trust is registerable.
- Pilot trusts – if the trust was already in existence before 6 October 2020 and does not hold more than £100 then the Trustees are not required to register. However, should a pilot trust have been created after this date or have funds added after that date meaning that the trust itself holds more than £100, then the trust needs to be registered.
- Statutory trusts – these trusts are not express trusts and generally therefore do not have to register on the TRS, unless they have a UK tax liability, as registering the trust enables the Trustee to obtain a Unique Taxpayer Reference number so that they can then report and pay the liability.
- Will trusts – these trusts are not required to register on the TRS for a period of two years from the date of death. Whether the trust needs to register after two years depends on what type of trust it is. However, these trusts may have to register from the date of death or the date the assets are transferred to the trust for taxable purposes if they have a UK tax liability.
Which types of trust are excluded from the requirement to register with TRS?
- Trusts of life or retirement policies, provided that the policy only pays out on death, terminal or critical illness or permanent disablement of the person assured, or to meet the costs of healthcare services provided to the person assured. If the trust holds multiple policies, then provided each policy within the trust meets the conditions above, then the exclusion continues to apply.
- Policies with surrender values, unless and until such time as the policy is actually surrendered and the cash sum is retained by the trust.
- Trusts arising from a personal injury payment, provided that the trust derives from payments made to a person as a result of their own personal injury.
- Co-ownership trusts where the trustees and beneficiaries are the same persons, i.e. they hold their ownership as tenants in common. Please note however that if the registered owners are holding the property on trust for any other beneficiaries then the trust will have to be registered on the TRS.
Is there a deadline to register?
Yes, although these deadlines differ depending on whether the trust is taxable or not and when the trust became liable for any tax:
Trustees of taxable trusts that were created before 6 April 2021 were required to register by 5 October in the tax year after which the trust starts to receive any income or has capital gains and becomes liable for Income Tax and Capital Gains Tax. For taxable trusts created after 6 April 2021, Trustees are required to register the trust within 90 days of the trust becoming liable for tax or by 1 September 2022, whichever is the later.
Trustees of non-taxable trusts that do not fall under any of the exclusions and are in existence on 6 October 2020 are required to register by 1 September 2022. Non taxable-trusts created after 6 October 2020 that do not fall under any of the exclusions must register within 90 days of the trust being created or otherwise becoming registerable or by 1 September 2022, whichever is the later.
What data is collected and what is it used for?
Trustees are required to provide their own details, together with the details of the settlor (person(s) who created the trust) and the beneficiaries of the trust. If the beneficiaries of the trust are yet to be determined (for example, the trust is discretionary and the Trustees have the ability to benefit a wider class of beneficiaries, i.e. any number of children or grandchildren), then a description can be provided. The Trustees are required to confirm their contact details and country of nationality and residence for tax purposes and that they have mental capacity to act. The lead Trustee is also required to confirm their National Insurance number.
For trusts with a UK tax liability, the Trustees are required to provide further information as to the assets within the trust, the Trust’s Unique Taxpayer Reference (“UTR”) number (if the trust had previously been taxable; otherwise, by completing the registration, a UTR will be issued to the lead Trustee) and the National Insurance numbers of all individuals.
The data stored on the TRS can be requested by law enforcement agencies, such as regional and national police forces, the National Crime Agency, the Financial Conduct Authority and the Serious Fraud office, and such information must be provided if requested from the Trustees. Third parties can also submit data access requests; however, this is only in relation to trusts which are not registered solely due to a UK tax liability. The requester must demonstrate that they have a “legitimate interest” to access the information.
The information that a requester can obtain from the register is limited to confirming the name of the trust and a beneficiary’s full name, month and year of birth, country of residence and nationality and the nature and extent of their beneficial interest. Data in respect of any persons related to the Trust who lack capacity or are minors may be exempt from being provided. Data may also be exempt where making the information available would expose a beneficial owner for a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation.
We appreciate that, because all of the above guidance is wide-ranging and complex, Trustees may remain unclear as to what obligations they have and whether their trust now needs to be registered. We are therefore offering Trustees a free 15 minute consultation with a member of our Tax & Estate Planning team so that we can look at the trust documentation and consider whether registration is required. If the matter is complicated and cannot be reviewed within 15 minutes, we are happy to provide a fee quote at that meeting. Please telephone 01622 698045 to book an appointment.
Article by Amy Turner-Ives, Trainee Legal Executive in the Tax and Estate Planning department