What happens if I don’t register a trust on the TRS?
Trustees of trusts that require registration on the Trust Registration Service (TRS) have a deadline to register the trust by 1 September 2022 (or within 90 days of creation of the trust, if later, so relevant for trusts created after 2 June 2022).
HMRC has indicated that it will not automatically charge penalties if a trust is not registered and will take a pragmatic and risk-based approach to charging penalties. However, it has not set out quite how this approach will work.
In the first instance, HMRC may write to trustees to remind them of their obligation to register on the TRS and to keep details on the Trust Register up to date – changes must be notified within 90 days. Trustees of a trust that has previously incurred tax liabilities are also required to make a declaration that the details are correct and up-to-date by the 31 January following the end of each tax year, even if there have been no changes to the trust’s details during the course of that tax year.
Failure to register the trust or update details within the applicable deadlines could result in HMRC levying fines against the trustees of:
(i) a £100 penalty for registration or updates made within 3 months of the due date;
(ii) a £200 penalty for registration or updates made between 3 months and 6 months of the due date; and
(iii) a £300 penalty if more than 6 months late.
It is likely that any fines or penalties will be levied against the lead trustee, in the first instance.
HMRC can also levy fines and charge interest for any tax liabilities that have not been declared and/ or paid as well as penalties for money laundering offences.
Other practical considerations
Trustees should also be aware that, under the Fifth Money Laundering Directive (5MLD), they will be required to provide evidence that their trust is registered on the TRS or the equivalent register of an EEA member state or confirm that it is otherwise exempt (e.g. an excluded trust) when entering into a new business relationship with an ‘obliged entity’. Obliged entities include financial institutions such as banks, investment platforms and financial product providers. This requirement takes effect from 1 September 2022 and could obviously have a huge impact on the trustees’ ability to invest trust assets.
Trustees, and their advisers, should prepare now for this change by ensuring that trusts are registered as early as possible before the relevant deadline. Trustees of new trusts may not be able to invest trust assets until such a time that they can prove that the trust is registered (or otherwise excluded).
It is also conceivable that some financial institutions may look to ‘gold plate’ these rules and require proof of registration for existing trustee investments when transactions are made, such as withdrawals or additional investments. Proof of registration may even be asked before noting changes to trustees or beneficiaries and their shares.
Whilst trust registration is the responsibility of the trustees, they are able to appoint an agent to register the trust on their behalf. Trustee Support Services can register trusts on behalf of trustees. Full details of our services are available on our website.