An introduction to the Trust Registration Service
New rules came into effect on 1 September 2021 that widened the scope of HMRC’s Trust Registration Service (TRS) and mean that most express trusts (a trust created deliberately by a settlor, either during lifetime or on death) now need to be registered. This includes both existing and new trusts.
The rules also formalise the trustees’ general duty to keep and maintain an up-to-date written record of the beneficial owners involved in the trust (including settlors, trustees and beneficiaries) as well as people with control over the trust, such as trust protectors and appointors. This information must be made available on demand from a law enforcement authority and, from 1 September 2022, to other third parties who have a legitimate interest to access the trust’s information. HMRC’s TRS Manual sets out when and how such legitimate access requests may be made.
Trusts with a perceived low risk of money laundering are excluded from the requirement to be registered – these include trusts of registered pension schemes, charities and trusts that are established by statute, for example, on intestacy. More details of excluded trusts are available on our website or in HMRC’s TRS Manual.
Examples of excluded trusts that may be of interest to financial advisers and wealth managers include:
• A trust holding a life insurance or healthcare policy, however the exclusion is only available if the policy can only pay out on the death, terminal or critical illness or permanent disablement, or to meet the healthcare costs, of the person assured. If the trust holds multiple policies, all policies must meet these conditions for the trust to be excluded from registration.
• A trust holding insurance policy benefits received after the death of the person assured is an excluded trust only as long as the benefits are paid out from the trust to beneficiaries within two years of the death. If such benefits are still held in the trust after two years, the trust will need to be registered.
• A ‘pilot’ trust which was set up before 6 October 2020 and which currently holds assets valued at no more than £100 is an excluded trust but pilot trusts set up after 5 October 2020 will need to register. If a pre-6 October 2020 pilot trust subsequently receives further assets so that its value then exceeds £100, it will have to be registered at that time. Pilot trusts include by-pass trusts to receive pension and death in service death benefits.
Should a trust that was previously an excluded trust incur a tax liability, it then needs to be registered on the TRS. The TRS is now also the route for trustees to obtain a unique taxpayer reference (UTR) to allow a self-assessment SA900 Trust & Estate tax return to be submitted to HMRC. The personal representatives administering a deceased person’s estate will also have to register to obtain a UTR if a tax liability has arisen on the estate.
Examples of trusts that do require registration include:
• A trust holding a life insurance policy(ies), that has acquired a surrender value that can be accessed during the policy’s lifetime. This is particularly relevant to trusts holding life insurance policies such as investment bonds or capital redemption policies and means that common packaged trusts, such as gift trusts, loan trusts, discounted gift trusts and retained interest trusts require registration, regardless of the type of trust used.
• A designated account holding unit trusts and/ or OEICs, where the donor’s intention at outset was to create a trust. As designated accounts are not constituted with a trust deed, registration can also be seen as further confirmation that a trust was created at outset.
• Will trusts that remain in existence for more than two years after the date of death.
The responsibility for registering a trust lies with the trustees, although they may appoint an agent to register the trust on their behalf. Each trust requires a separate Government Gateway account to be registered. It is expected that many trustees may be unwilling to register trusts themselves or may find the process daunting and time-consuming.
The deadlines for registering a trust are by 1 September 2022 or within 90 days of creation of the trust, if later. Existing trusts and new trusts created before 2 June 2022 therefore need to be registered by 1 September 2022, a trust created after 2 June 2022 within 90 days of its creation. Similarly, trustees must now update the Trust Register for any changes to the details of the trust, including incurring a tax liability, changes to trustees, beneficiaries or people with control or closure of the trust, within 90 days of the date of the change.
Trustees, and their advisers, should act now to determine whether their trust(s) is required to register on the TRS. Those currently establishing new trusts should consider registering the trust as soon as the trust is created.
Trustees of trusts that are required to register but who have not registered the trust within its applicable deadline (see above) may become liable to fines and penalties.
HMRC has indicated an intention that it will send a ‘nudge’ letter, whilst the new rules are bedded in, to trustees of a trust that it believes should have been registered but which hasn’t been, before considering enforcement action, but trustees may be better advised to take action before this stage.
Trustees of trusts that are not required to register (excluded trusts) may wish to consider ‘voluntary’ registration as a way to fulfil their general record keeping duties on the beneficial owners of the trust, discussed above.
Our website summarises the new rules, how the TRS works and how we can register trusts on behalf of trustees.