The online Trust Registion Service (TRS) has recently been launched by HMRC to satisfy the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, which came into force on 26 June 2017 alongside HMRC’s digital strategy. Under the new online service, trustees and their agents must register and update their records online.
HMRC has provided scant information and guidance on Gov.uk in relation to the TRS, although there is more information on professional body websites such as the CIOT. Many unrepresented trustees could potentially fall foul of this requirement and therefore potentially be subject to a financial penalty.
What types of trusts need to register?
Trustees of both UK resident trusts and offshore trusts that have UK tax liabilities on UK source income or certain UK assets may need to register. Registration is required for all ‘taxable relevant trusts’.
Only express trusts fall within this definition. An express trust is generally one that the settlor deliberately creates, transferring property to a trustee.
A taxable relevant trust will only include a trust in any year in which its trustees are liable to pay any of the following taxes in the UK in relation to assets or income of the trust:
- income tax;
- capital gains tax (CGT);
- inheritance tax;
- stamp duty land tax;
- land and buildings transaction tax; and
- stamp duty reserve tax.
What are the deadlines for registering and updating the Trusts Register?
Where relevant trustees are chargeable to income tax or CGT for a year of assessment, and have not received a notice requiring a return, they have an obligation to notify an HMRC officer that they are chargeable. The deadline is usually 5 October following the end of the tax year. HMRC agreed to extend the deadline the first year to 5 January 2018.
Going forward, trustees will need to use the Trusts Register for this notification purpose and this is also the only way to obtain a Unique Taxpayer Reference.
In all other cases where there is a requirement to complete the register, the deadline is 31 January 2018 after the end of each tax year, although for the first year HMRC has said it will not impose a penalty on the failure to register existing trusts on the TRS by 31 January 2018, nor treat as non-compliant, providing this is done by 5 March 2018.
What information is required?
Significant information and documentation is required and we have not provided complete details below as this note is only intended to provide an overview of the new rules.
The rules are drafted very widely; for example, as well as details such as the identity of settlors, trustees, beneficiaries and classes of beneficiaries and any individuals with control over the trust, the regulations also require details of ‘any other individual referred to in any document such as a letter of wishes relating to the trust’.
Specific information is also required about the trust itself, including a requirement to provide a statement of accounts for the trust, describing the trust assets and identifying the value of each category of the trust assets (including the address of any property held by the trust). The value is the historic value when the trust was first settled, although for existing trusts HMRC has provided some relaxations.
What else might I need to know?
- There is a box on the trust tax return that will need to be ticked each year confirming that the information supplied on the Trust
- Register is ‘accurate and up to date to the best of your knowledge and belief’; and
- The information on the register may be inspected by any law enforcement authority. Under current regulations, it will not be open to the public.
- While not yet quantified by HMRC, the intention is that there will be a financial penalty for not complying with these deadlines.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.