Changes to HMRC’S Trust Registration Service (TRS)

Recent legislation is now come in force, requiring the majority of UK non-taxable trusts in existence on or after 6 October 2020 to be registered by trustees on the HMRC Trust Registration Service.

The new rules include the following:-

• Non-taxable trusts in existence as at 6 October 2020 or created after 6 October 2020 must be registered by 1 September 2022;
• Non-taxable trusts created on or after 4 June 2022 must be registered within 90 days of creation; and
• Changes to the trust details or circumstances must be updated within 90 days of the change.

The main categories of trusts caught by the new requirements include:

1. UK express trusts, subject to exclusions (see below); and
2. Non-UK express trusts, which:
   • Acquire land or property in the UK on or after 6 October 2020; or
   • Have at least one UK resident trustee and enter a new business relationship with a UK ‘relevant person’ (broadly a UK professional service provider) on or after 6 October 2020. This means that non-UK trusts with no UK resident trustees will not be required to register if their only link to the UK is through a business relationship with a UK based adviser.

An express trust is a trust deliberately created by a settlor, such as in the form of a deed or declaration of trust. Certain types of trusts, such as statutory trusts set-up under the terms of legislation, are not express trusts.

Not all trusts are registerable on the TRS (provided that they have no liability to taxation in the UK). These are referred to as “excluded trusts”. A non-exhaustive list of excluded trusts includes:

• Co-ownership trusts where the legal co-owners and underlying beneficial owners are identical;
• Charitable trusts;
• Registered pension schemes;
• ‘Pilot’ Trusts set up prior to 6 October 2020 holding assets worth less than £100;
• Trusts imposed by statute (e.g. intestacy or bankruptcy);
• Trusts with life policies paying out on death, terminal illness or disability (as distinct from life policies used as an investment vehicle);
• Certain ‘financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets.

Importantly, however, these exemptions can only apply so long as the trust is not taxable. Even where an exemption from registration applies, the trustee will generally still be required to keep certain records, so the rules will still need to be considered.

The widening scope of the TRS has significantly increased the regulatory burden of trustees. Trustees are expected to take all reasonable steps to comply with their legal obligation, including registering appropriate trusts and notifying HMRC of relevant information. Sanctions will be imposed on trustees that have not fulfilled their obligations. HMRC have confirmed that you will not get a penalty for failure to register or late registration unless that failure is due to deliberate behavior. If you deliberately fail to register your trust on time, or deliberately do not keep the register up to date, you may have to pay a penalty of £5,000.