If you are reading this blog, chances are you already have some idea what the Trust Registration Service (TRS) is. Perhaps you are a trustee wondering whether you need to register with this service. Maybe you are thinking of setting up a trust, or have already set up a trust, and want to know what your obligations are to Her Majesties Revenue and Customs (HMRC). Hopefully by the end, all your queries will be answered!
In short, the TRS is a one stop online portal for trustees and executors of complex estates to comply with their reporting requirements under anti-money laundering and anti-avoidance legislation. Specially the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI No. 2017/692), which came into force on the 26th June 2017.
Those regulations set out a substantial list of details that trustees and executors are obliged to provide to HMRC. However, that duty to report only effects some trusts and estates.
Which Trusts Need to Register with the TRS
Firstly, the regulation only effects express trusts. That is, trusts that have been expressly created by a Settlor. This includes some ongoing Will trusts but does not cover statutory, resulting and constructive trusts.
Secondly, the trust must have a liability to UK tax (whether or not the trust is actually based in the UK).
Tax in this context means a liability to inheritance tax (IHT), capital gains tax (CGT), income tax or stamp duty land tax (SDLT).
If you run an express trust that has no UK tax liability, then you do not need to register. Likewise, if your trust has a tax liability less than £100 that has been derived solely from savings interest, then you also do not need to register.
In theory, if your trust has avoided a tax liability using exemptions and reliefs, or because the liability falls on a person other than the trustees (the Settlor or a beneficiary) then again, you do not need to register. In practice we find that HMRC often refuse to process some claims to relief without registration (notably principal private residence relief and hold-over relief for CGT).
Finally, if you are running a trust that registered with HMRC using the old system (form 41G) you need to further register with the TRS (if your trust incurs a tax liability).
Which Estates Need to Register with the TRS
HMRC's Trusts, Settlements & Estates Manual, states that an estate would be considered complex if it falls into any of the following categories:
the tax liability (income and/or capital gains) for the whole of the administration period is in excess of £10,000; or
the estate has a value at the date of death in excess of £2.5m; or
the proceeds of assets sold by the personal representative in any one year exceeds £500,000 for deaths on or after 6 April 2016.
The last category is perhaps the most surprising. In the south of England, many estates will contain a house worth more than £500,000 although the estate itself may bear no liability to IHT and may, in practice, be quite straight-forward to administer.
We find that often we can avoid the registration requirement using HMRC’s informal disclosure procedures. However, if you are unsure about your duties as an executor, please contact us for further advice.
A lot! The TRS will ask for:
The name of the trust;
The trust address and telephone number;
The date the trust was established;
The country where the trust is resident;
Details of the trust assets, including addresses of properties, and an estimated market valuation of assets held at the date the assets were settled; and
Identity details – i.e. name, address, date of birth and National Insurance (or passport/ID number if no NI number) – of the settlor, trustees, the beneficiaries (or class of beneficiaries where individual beneficiaries have yet to be determined or identified) and any person exercising effective control over the trust, such as a protector or appointor.
Timeframes for Registration
This depends on whether the trust is already registered for income tax or CGT under the old 41G system.
If the trust is already registered and the trustees of the trust have incurred a relevant UK tax liability in a given tax year, registration must be completed by no later than 31 January after the end of that tax year.
If the trust is not registered but has incurred an income tax or a CGT liability for the first time in a given tax year, registration must be completed by no later than 5 October after the end of that tax year.
If the trust is not already registered but has incurred either an IHT, SDLT, stamp duty reserve tax or a land and buildings transaction tax (Scotland) liability in that tax year, then registration must be completed by no later than 31 January after the end of that tax year.
Although the system suffered lengthy teething problems when it was first introduced, and during which time HMRC suspended the imposition of penalties, they have now started to apply penalties for any trust or estate missing the above deadlines.
How to Register
It is the trustees or executor’s responsibility to register if this is required although you are welcome to appoint an agent for this purpose. Allan Janes is a registered agent with HMRC and can undertake this work on your behalf.
You cannot simply sign straight in to the TRS. First you must open a government gateway account. Please follow this link for further information.
If you have any queries about your reporting obligations with HMRC or would like any assistance with this aspect of trust adminstraion, please do not hesitate to contact any member of our Wealth Management and Taxation Team.