Trust Registration Service (TRS)
Learn about the requirements of the TRS which became operational on 13 July 2017.
- The TRS currently reflects government obligations under 4MLD
- A consultation is in progress to transpose 5MLD into UK law
- ‘Express’ trusts with UK liabilities are required to register whether UK or non UK resident
- No TRS obligations for trustees of a bare trust as no UK tax liability arises at trust level
- Registration deadline depends on whether the trust is already registered for Self-Assessment
Money Laundering Directives
This article considers the UK government’s obligations under the Fourth Money Laundering Directive (4MLD) which came into effect in June 2017. There is currently a consultation to decide how to transpose 5MLD into UK law. Member states, including the UK have eighteen months from 10 July 2018 to transpose 5MLD into domestic law (by 10 January 2020), with a further two months to implement the TRS requirements (by 10 March 2020).
The article reflects Draft HMRC Guidance dated 22 November 2017. There appears to be no published final guidance. The legislation is set out here
In the past, HMRC required completion of paper Form 41G (Trust) to register a new trust. This captured important information such as the names and addresses of the trustees, details of any professional agent acting, the governing law, lifetime trust or will trust, and so on. HMRC did state however “if there is no income arising, and no likelihood of income or gains in the future, you do not need to complete this form”. This was a useful exclusion in situations where the trust fund simply comprised a non- income producing investment bond.
HMRC has now embraced the digital world and recognised the UK government obligations under 4MLD. Form 41G (Trust) has therefore been withdrawn and instead trusts that are required to register, do so through the TRS.
Note that trusts in place before the introduction of the TRS are also required to be registered because the new legislation expands the scope of information previously collected.
The TRS provides a single online route for trusts (and complex estates) to comply with their registration obligations and to obtain their Self-Assessment (SA) Unique Taxpayer Reference (UTR). Trusts require a UTR in order to submit the SA tax return.
A complex estate is one that does not meet the conditions for using informal payment procedures.
For the avoidance of doubt, these TRS obligations are unconnected to the obligations to complete IHT100 when lifetime transfers are made.
‘Express’ trusts with UK liabilities are required to register whether UK or non UK resident.
The term “express trust” means a trust that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose, as opposed to a statutory, resulting or constructive trust.
The legal responsibility for registration lies with the trustees.
Where there are multiple trustees, it is a matter for the trustees to decide and appoint a lead trustee to complete the registration process. All trustees are equally legally responsible for the trust, and therefore the nominated ‘lead’ trustee is simply the main point of contact for HMRC. If, for example, there are four trustees, this would be recorded as one lead trustee and three additional trustees. The trustees can appoint an agent to complete the registration process if they so wish.
With regard to professional advisers, the TRS requires the details of the agent (if one exists) registering on behalf of the trustees. No further information on other advisers is required. In saying that, trustees should keep their own written records of any advisers being paid to provide legal, financial or tax advice in relation to the trust.
When a trust is registered for the first time, that is a new registration process. In later years the trustees will either just update the details of the existing registration or confirm that the details remain up to date and accurate.
Note that the data on the Register is not available to the public. It can only be shared by HMRC with law enforcement authorities in the UK or in another EEA member state if requested.
The guidance is very detailed and therefore the following simply reflects some of the ‘highlights’ that may be particularly relevant for advisers.
UK trusts that need to use the TRS
An ‘express trust’ where the trustees have incurred a liability, in a given tax year, to pay any of these UK taxes
- Income Tax
- Capital Gains Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax and (in Scotland) Land and Buildings Transaction Tax
UK trusts that do not need to use the TRS
Trusts which do not need to register include those falling under these circumstances
- the trustees do not need to file a tax return and have not incurred a UK tax liability
- the settlor or a beneficiary of the trust has incurred the UK tax liability but the trustees are not liable
- the trustees of a bare trust as no UK tax liability arises at trust level
- where all income is received directly by the UK resident beneficiary and not reported on the trustees’ tax return (unless they have another UK tax liability such as capital gains tax)
- the trustees of a charitable trust will not have to register until they incur a UK tax liability
- a statutory trust
- the trust has no other UK tax liability other than a tax liability of less than £100 on bank or building society interest income
With regard to the first bullet, a discretionary trust holding a non- income producing investment bond springs to mind (assuming also no IHT liabilities). Remember however that UK resident trustees may become taxable if a chargeable event gain subsequently arises and the settlor cannot be taxed because he/she died in an earlier tax year or is non UK resident. For example if the bond is held in a discretionary will trust then the trustees will need to register if a chargeable event gain occurs. If a UK resident settlor is taxable albeit that he/she may recover the tax from the trustees, then that situation seems to fall under the second bullet point.
Deadlines for registration
This depends on whether the trust is already registered for Self-Assessment (SA) for Income Tax or Capital Gains Tax.
Trust already registered for SA
- Where the trustees incur a UK tax liability in a given tax year, then the registration deadline is 31 January after the end of that tax year.
Trust not registered for SA
- Where the trustees incur an Income Tax or a Capital Gains Tax liability for the first time in a given tax year, then the registration deadline is 5 October after the end of that tax year in order to give enough time to issue the UTR.
Trust not registered for SA
- Where the trustees incur either an Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, or a Land and Buildings Transaction Tax (Scotland) liability in that tax year, then the registration deadline is 31 January after the end of that tax year.
Information required by the TRS
Details of the trust assets, including addresses of UK properties, and a market valuation of assets held at the date that the assets were settled. The TRS only collects information on the values at the initial registration.
In addition, the identity of the settlor, trustees, any person exercising effective control over the trust and the identities/names of all beneficiaries who are either actual or potential beneficiaries. It is possible to use a description of the class of persons to identify (actual or potential) beneficiaries. Where a beneficiary is un-named, being only part of a class of beneficiaries, a trustee will only need to disclose the identity of the beneficiary when they receive a financial or non-financial benefit from the trust.
The information required will include
- Date of birth
- NI number (NINO) if UK resident, unless under 16 years old, or a UTR, if any
- An address and passport or ID number for non-UK residents, if no NINO
Example of disclosure of beneficiaries
Trust deed states that the beneficiaries are the grandchildren of the settlor (some are alive and some are yet to be born) and any other persons added by the trustees as per instructions from the settlor.
The settlor adds his niece, Anna, so that she may benefit at the trustees’ discretion. The settlor also adds that, if Anna dies before any of the grandchildren, then a distribution can be made to his nephew, Brian.
For TRS purposes, the grandchildren should be listed as a class. However, if the trustees make a financial payment or provide a non-financial benefit to any of the grandchildren then at that point in time, the trustees should record the identity details of that particular grandchild that has been in receipt of a benefit.
Anna’s details should be registered as an individual, as she could receive a benefit at any point in time.
John should be identified as a class of beneficiary but if at some point in time in the future John is in receipt of a benefit from the trust assets, then this means he can be identified by name and as such his details should go on the TRS.
If there are any changes to the trust when does the TRS need to be updated?
Updates to the TRS are required by 31 January after the end of the tax year in which the change occurred if the trustees incurred a UK tax liability in the previous tax year. However, in practice HMRC will expect trustees to ensure that details of their trust are accurate and up to date at any point in time they make changes on the Register. Where no relevant changes have taken place since the end of the previous tax year, the update can be limited to confirmation that no such changes have occurred.
Please note that there have been teething problems with the functionality for lead trustees and agents to update their information or declare that there have not been any changes.
If the trustees have no UK tax liability (in respect of any given tax year) there is no requirement to update the Register. An update will then need provided by 31 January after the end of tax year in which the trustees do have a UK tax liability. However, changes can be made on a voluntary basis, even if the trustees had no UK tax liability.
Changes can be made to the trust’s correspondence address, the lead trustee can be changed, and it is possible to add or remove the details of the people who are associated with the trust at any time. For example, it is possible to add a new beneficiary or remove from the Register altogether a trustee or even an existing beneficiary if they are no longer deemed to be either an actual or potential beneficiary. It is also possible to close a trust or estate if it ceases to exist. These changes can be made at any time, and it is possible to update the information held on the Trust Register (in relation to any individual trust) on multiple occasions in the course of any given tax year.
The details of trust assets are only provided once at the first point of registration and if this changes over time there is no need to update information about the trust assets on the Register.
Although registration is not required for bare trusts, the legislation still requires that trustees hold accurate and up-to-date written records of all the actual and potential beneficial owners of the trust.
Interest in possession trusts where the income has been mandated to the income beneficiary
If the income is not received by the trustees, because it is paid directly to the beneficiary, then HMRC have no statutory basis to charge the trustees to income tax. Therefore the trustees have not incurred an income tax liability. No registration is required unless the trustees have incurred an income tax liability on other income, or they have incurred another tax liability, for example CGT.
Discretionary trusts and IHT
If a trust incurs IHT charges in 2019/20 but had no further UK tax charges until the 10th anniversary in 2029/30 then what is the position?
The trigger point for registration is when the trustees have incurred a UK tax liability. So, if the trustees incur a UK tax liability in 2019/20, then registration is required by 31 January 2021.
If no further relevant UK tax is paid until 2029/30, the next deadline is 31 January 2031 by which point the registered information must be updated or, where it remains up to date and accurate, a declaration that no changes have occurred. However, it is possible to voluntarily update the registered information before 31 January 2031.
Where the trust is registrable because there is an IHT liability, the registration deadline is determined by reference to the event and not the payment deadline (which is 6 months later). For example, consider an event which arises on 16 January 2020 with a payment deadline of 16 July 2020. In that case, the trust needs registered by 31 January 2021 i.e. 31 January after the end of 2019/20.
Maintaining accurate and up to date written records
Do trustees of all UK ‘express’ trusts regardless of incurring a tax liability in a given tax year need to maintain accurate and up to date written records? Yes. HMRC expect the trustees to maintain accurate and up to date written records of all the actual and potential beneficial owners of the trust as set out under regulation 44(1) of the legislation.
Written information to be maintained:
- Full name of the trust
- The date on which the trust was created
- The country where the trust is considered to be resident for tax purposes
- The place where the trust is administered
- A contact address for the trustees
- Full name of advisers who are being paid to provide legal, financial or tax advice to the trustees in relation to the trust
- Details of the settlors and beneficiaries
This information should be held because under the legislation any law enforcement authority can request information about the beneficial owners of the trust including from a trust which does not incur a liability to any of the relevant UK taxes.
5MLD expands the scope of the trust register to include all UK resident ‘express trusts’ and non-EU express trusts that acquire UK land/property or enter into a new business relationship after 10 March 2020. The idea has been floated of a carve out for insurance policies held in express trusts but at the time of writing it is not known if this will prevail given that 5MLD does not provide scope for carve outs, exemptions or de minimis thresholds.
For those unregistered trusts already in existence on 10 March 2020, the government proposes a deadline of 31 March 2021 for them to register on TRS. For trusts created on or after 1 April 2020, the government proposes that the trust should be registered within 30 days of its creation. It is also intended that this 30 day deadline will be used for any amendments to be made to the TRS data in due course: that is, when any of the required information changes, such as the name or contact details of a trustee or beneficiary.
The government has set out examples of the categories of UK trusts that are likely to fall within the definition of an express trust and this includes discretionary trusts and “many types of bare trusts.”
Under 5MLD there are new data sharing requirements which mean information on the register may be disclosed to others in addition to the current obligation HMRC has to share data with other law enforcement authorities.
The consultation sets out the new requirements and asks for views on how they may be fulfilled.
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