The latest changes to trust registration – what you need to know

HMRC now require most trusts to be registered. But what does this mean and who does it affect? The short answer is that trustees are under a legal obligation to disclose details of trusts to HMRC and this can even include trusts that pay no tax! As a result, many trustees could be caught by this obligation to register. It is important that trustees adhere to HMRC’s requirements, particularly approaching 1 September 2022, to avoid any unnecessary penalties or criticism from the beneficiaries. Read on for the lowdown and to make sure you don’t get caught out by these changes.

What is the Trust Registration Service?

The Trust Registration Service (TRS) is implemented by HMRC and requires trustees of most UK trusts (but not all) to register details of a trust with HMRC. The TRS acts as a central register, with its dual purpose to record details of trusts and tackle money laundering.

What trusts needs to be registered with the TRS?

Originally, only trusts that incurred a UK tax liability had to be registered, but new law has widened the scope meaning many more trusts than before now must be registered.

Now, all “express trusts” are required to register with HMRC. An express trust is a trust is an arrangement created by a settlor, usually in writing, appointing trustees to manage trust assets for named beneficiaries (or a class of beneficiary). This includes discretionary trusts, declarations of trust for co-owners of property and trusts established under a Will on death.

Taxable vs. non-taxable trusts

The most surprising aspect of the TRS is that even non-taxable trusts may be caught by HMRC’s reporting obligations. A non-taxable trust does not incur any liability for tax in the UK, such as inheritance, income or capital gains tax. This could be the case where a trust has been created to hold beneficial interest in land, or ‘shell trusts’ which only hold a nominal amount on creation.

But there are certain trust arrangements which are excluded from HMRC’s obligation to register, and these commonly include:

• Legislative trusts and those imposed by court order, such as trusts ordered by the court in divorce proceedings or estate disputes
• Pension scheme trusts – not including pilot trusts set up to receive pension death benefits
• Insurance policy trusts – where the trust is paying out a sum only e.g. on death
• Charitable trusts
• Pilot trusts – which do not have a value greater than £100 and were created before October 2020
• Trusts created on death – where the trust is going to be wound up within two years of death
• Co-ownership – where the trustees and beneficiaries of jointly held property (e.g. land) are the same person
• Personal injury trusts – where a trust is holding a claim amount or is a disabled persons trust
• Accounts held for minor children and people who have lost capacity.

Deadlines and process for registering trusts

The relevant deadlines for the registration of trusts under the TRS are:

• Non-taxable trusts in existence on or after 6 October 2020 must be registered by 1 September 2022
• Non-taxable trusts created after 1 September 2022 must be registered within 90 days of creation
• From 1 September 2022, changes to the trust details and/or circumstances must be notified within 90 days of the change

Where trusts have incurred a UK tax liability in a tax year, those trustees should still comply with the existing timescales. So, for example, if the trust was liable to income tax or capital gains tax in 2020/21 for the first time, then the trustees should have registered the trust by 5 October 2021.

For taxable trusts that are created on or after 6 April 2021, the trust should be registered either 90 days of the trust becoming liable for tax, or by 1 September 2022 (whichever is later).

It is the responsibility of the trustees to register the trust when it is required. Failure to register the trust on time and to update the register with any changes may attract a financial penalty of £100 per offence.

How do I register a trust?

To register a trust, or update the trust’s details, a ‘lead trustee’ will need to create a Government Gateway account. The trustee will then be able to enter the detailed information that is required to be reported to HMRC. Alternatively, trustees could authorise an agent to undertake the registration of the trust on their behalf. A Unique Tax Reference will be assigned to that trust. Therefore, a trust must first be registered before submitting trust tax returns or paying any tax that is due.

Do I need a lawyer to register a trust?

Keeping up with HMRC’s ever-changing requirements can be difficult so getting legal help from a specialist is recommended.

We have a dedicated trust team who can advise you whether your trust is required to be registered. We can also act as an agent to complete registrations, updates and annual declarations for trustees who require assistance.

If you are unclear whether your trust needs registering, we would be happy to review your trust and answer that question for you. Please contact Andrew Spearman.