Unincorporated clubs and associations
Trustees of unincorporated clubs and associations who own property or other assets may be required to register their trusts on the Trust Registration Service (TRS). Whilst the deadline for registration of non-taxable trusts that were in existence on 6 October 2020 was 1 September 2022, we would recommend that trustees of unregistered trusts requiring registration consider registering as soon as possible to avoid potential HMRC enforcement action. Any trusts established after 3 June 2022, that are not excluded trusts for the purposes of the TRS, should be registered within 90 days of creation.
An unincorporated club or association does not, itself, have any legal capacity, so, often, any property or other assets owned by the club are held on trust by some or all of the members for the benefit of the wider membership. This trust may be evidenced by a physical trust deed or declaration of trust, but a trust can also be established by a series of deliberate actions without the need for a written document. Assets held on trust for the club’s membership could include freehold or leasehold property (heritable property in Scotland), intellectual property, equipment and bank accounts. These assets are then held on, usually, a bare trust with the beneficiaries of the trust being the club’s membership (expressed as a class of beneficiaries in recognition that the individuals making up the club’s membership can change).
Affected clubs and associations who are likely to need to take action are those whose club or association:
- is an unincorporated association;
- owns property or other assets that are held by a management committee or by trustees; and
- is not a registered charity.
Whilst the requirement to register on the TRS does not apply to UK registered charities, it does apply to community amateur sports clubs (CASCs) and other not-for-profit clubs. Further details are available in the TRS Manual.
Registering on the TRS
Trustees can register their trust on gov.uk for free but may find the registration process complicated, not particularly user-friendly and time consuming. They can also decide to use an agent to register the trust on their behalf. Trustee Support Services can register trusts on behalf of the trustees for a fee of, currently, £200 + VAT per trust.
Obliged entities
Trustees of unregistered trusts may also face difficulties with administering the club’s or association’s affairs as obliged entities (also known as Relevant Persons) are required to ask for proof of the trust’s registration (or exclusion from registration) when providing professional services to the trustees on an ongoing basis. Obliged entities include financial institutions (banks, building societies, insurance companies, investment companies etc),auditors, accountants, solicitors and tax advisers. Evidence of a trust’s registration is provided by a digitally signed pdf document that can be downloaded from the Trust Register.
The obliged entity is also required to check the information in the proof of registration document against its own records and, if it finds any discrepancies, resolve these, in the first instance, with the trustees. If a discrepancy cannot be resolved, the obliged entity must then make a report to HMRC.
Trust Register
Once registered, any changes to the registered information must be updated on the Trust Register within 90 days of the date of the change if potential enforcement action by HMRC against the trustees is to be avoided. HMRC has the power to levy penalties of up to £5,000 per offence against the trustees and the trustees, not the club or association, are personally liable as the penalty results from the trustees’ failure to meet their statutory duties.
Time to act?
Most unincorporated clubs and associations are run by a small number of the membership who provide their services voluntarily and most are unlikely to be aware of the requirement to register the trust on the TRS. We believe that tens of thousands of clubs and associations in the UK will need to address this issue urgently and that any professional advisers who may work with the clubs, or be members themselves, should seek to raise the issue with the club’s trustees or management committee.
We would be happy to discuss the issues raised in this blog with any club or association trustees or management committee members who believe that their club or association may be affected and who want to resolve the situation. Please feel free to contact us.
