Since 2017, trustees incurring a UK tax liability have had to register on the trust registration service (TRS). The scope of the TRS has since been widened and trustees will need to review their trusts to confirm if there is a requirement to register on the TRS by the 1 September 2022 deadline.
Which trusts need to register?
UK resident trusts
All UK express trusts now need to register unless specifically excluded. An express trust is generally one that the settlor deliberately creates, transferring property to a trustee. The rules apply to any new trusts created, as well as to all existing trusts.
Some express trusts have been specifically exempted from registration and these include:
- trusts with under £100 worth of assets, which were in existence before 6 October 2020;
- UK registered pension schemes trusts;
- charitable trusts registered in the UK, as well as exempt or excepted charities;
- co-ownership trusts: trusts relating to joint ownership of property as tenants in common, where legal trustees and beneficiaries are the same persons;
- will trusts created on death that only receive assets from the estate and are wound up within 2 years of death;
- during the lifetime of the person assured, a trust holding a life policy or retirement policy which will pay out on the death, terminal or critical illness or permanent disablement of the person assured; or to meet the cost of healthcare services provided to the person assured;
- trusts that receive pay-outs from a life assurance policy on the death of the person assured and are wound up within two years of the death;
- personal injury trusts;
- some employee share scheme trusts such as share incentive plans; and
- bank accounts for minors, see more detail below.
If an excluded trust has a UK tax liability, however, it will still need to register.
Bare trusts and investments for children
Where individuals, such as parents or guardians, open bank or building society accounts for the benefit of a child under the age of 18, this typically creates a bare trust with the individual holding the bank account on trust for the benefit of the minor child.
There is no general exclusion from registration for bare trusts, but trusts created when opening cash bank accounts for a minor child are specifically excluded. This does not extend to investment accounts, where registration will still be required.
Child trust funds and Junior ISAs are not trusts and so do not need to be registered.
Non-UK resident trusts
Non-UK trusts must be registered if the trustees:
- enter into a new business relationship, on or after 6 October 2020, with a UK ‘relevant person’, at least one of the trustees is UK resident and the trust is not registered on an EEA register. A UK relevant person is defined as a specific list of organisations, including tax advisers, lawyers, financial institutions and estate agents;
- acquire UK land or property. This only applies to property acquired on or after 6 October 2020; or
- receive UK source income, or own assets in the UK on which UK tax is payable.
Deadlines for registering
Any trusts within the scope of the TRS that were in existence on or after 6 October 2020 need to be registered by 1 September 2022. Where a new trust is created, the trustees will need to register within 90 days, or by 1 September 2022 if later.
If a trust is exempt from registration under one of the categories listed above, it will still need to be registered if it has a UK tax liability. Generally, this will be within 90 days of the trustees becoming liable to pay UK taxes, or by 1 September 2022 if later. Where the trust was created before 6 April 2021, however, the deadline will be 5 October following the end of the tax year where the liability is to income or capital gains tax, or 31 January if any other tax.
What information is required?
The trustees need to provide specific information on the trust, as well as information on the persons involved in the trust, including the settlor, trustees and beneficiaries. If a trust has a class of beneficiaries, who are not yet known or named individually in the trust deed, only a description of the class of persons who are entitled to benefit from the trust is required. If a member of a class of beneficiaries receives a benefit from the trust, they will need to be included separately.
Additional information is required for trusts with a UK tax liability, including information on assets held by the trust.
Are there any ongoing requirements?
Once registered, the trustees must keep the information on the TRS up to date. In particular, any changes to the beneficial owners’ details, which include settlors, trustees and beneficiaries, as well as any new controlling interests that the trustee acquires in an entity that is outside the UK and the EEA, must be updated within 90 days of the date that the trustees become aware of the changes.
If the trustees incur a tax liability in the tax year, they must also declare the trust is up to date on an annual basis, through the TRS, by the following 31 January. Where the trustees submit an income tax return, this must also be confirmed on the tax return.
Trustees should review their trusts to confirm if there is a requirement to register on the TRS and ensure that the deadline is met.
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.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice before making decisions. HMRC Tax Year 2022/23.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.