TRUSTS REGISTRATION SERVICE
The Trusts Registration Service is a recent initiative from HMRC, which requires attention from all trustees. The current rules mean that all UK trusts which declare tax to HMRC are required to register using this service. New changes have been announced, which mean that up to 2 million UK trusts will be required to register from 10th March 2020.
This article will allow trustees to establish whether and when their trust is required to register using this service.
- What is the Trusts Registration Service?
- When should trustees use the Trusts Registration Service?
- What are the deadlines to register?
- How to register your trust
- Further information for trustees
What is the Trusts Registration Service?
The Trusts Registration Service replaced the previous system for trusts, which required them to register using paper-based forms. Now, the Trusts Registration Service operates online.
This service will have allow:
- A central register of the beneficial interests of tax-paying trusts for compliance with Money Laundering regulations
- Notification to HMRC of trust tax liabilities
Your trust will receive a unique tax reference, and trust tax returns will be issued to you as appropriate.
When should trustees use the Trusts Registration Service?
Under the current rules, trustees must use the Trusts Registration Service if the trust has incurred a tax liability to HMRC, or if the trust is registered for self-assessment. This requirement is set to be widened to almost all trusts from 10th March 2020 (see below).
Under current rules, you need to register your trust if it becomes liable to pay these taxes:
- Income tax
- Capital gains tax
- Inheritance tax
- Stamp duty
Trust Registration changes proposed to most trusts
Currently, trusts do not need to register using the Trusts Registration Service if they do not need to declare tax. This may happen if:
- No tax is payable by the trust
- Tax relief means no tax is payable
- Tax is paid directly by the settlor or the beneficiaries of the trust
The Government recently announced that it plans to implement the 5th EU Money Laundering Directive (5MLD). As a result, they consulted on their plan to introduce sweeping changes to the Trusts Registration Service, which would take effect on 10th March 2020. These changes have been through a consultation process, and the legislation has not yet been implemented. We expect that the date for implementation may be delayed, and will advise clients when this is finalised.
The new rules (when implemented) will apply to almost all trusts that are established in writing, not just those with tax liabilities as is the case under the current rules.
Therefore your trust is likely to have to register if it fits any of the following categories:
- Interest in possession trusts
- Discretionary trusts
- Loan trusts
- Employee ownership trusts
Under the proposed new rules, the value of the trust is not relevant.
Trusts out of scope of the rules
The UK Government recently issued a consultation on the Trusts Registration Service, which listed certain trusts which are likely to be deemed to be outside of the scope of the proposed rules:
- Statutory trusts
- Jointly owned assets
For example a joint bank account, or property;
- Bare trusts
- Personal Injury Trusts
- Vulnerable beneficiary trusts
- Trusts for life assurance or retirement policies
- Registered pension schemes
This list has not been confirmed in the final rules, as the consultation period is still open.
What are the deadlines to register your trust?
Which trusts should register now
Under current rules, trustees should complete the registration process if:
- The trust is already registered for self-assessment, and the trust incurs UK tax liability.
- Your trust should register by the 31st of January after the end of the tax year in which the liability falls.
- The trust is not already registered for self-assessment, and the trust incurs UK tax liability for the first time.
- Where other taxes are payable, your trust should register by the 31st of January after the end of the tax year in which the liability falls.
- Where income tax or capital gains tax is payable, the deadline is 5th October after the end of the tax year in which the liability falls.
Proposed new rules from 10th March 2020
- New trusts formed after 10th March 2020
- All new trusts formed after 10th March 2020 will be required to register within 30 days, or by 10th March 2022, whichever is the later;
- Trusts set up after 10th March 2022 will be required to register within 30 days
- Trusts in existence at 10th March 2020
- These trusts should register by 10th March 2022
These proposed dates have been changed from the previous deadline of 31st March 2021.
Penalties for late registration of trusts
The current rules levy penalties between £100 and £300 for late registration, or 5% of the tax owed (whichever is the greater). The new proposals states that there will be no penalty for the trust for an initial failure to register. A letter will be sent to the trust requiring registration, with penalties of £100 per offence after that.
How to register your trust
What information will required to register a trust?
- Name of the trust
- Type of trust
- Date the trust was created
- The tax reference of the trust
- Trustees’ contact details including National Insurance numbers and dates of birth, and passport details for non-UK trustees
- Details of the beneficiaries, including potential beneficiaries
- Details of the assets held by the trust
Advisers are required to check registration
Under the proposed rules we will be required to check the trusts registration service to establish that the trust is correctly registered before we are able to give you advice.
We will contact all affected clients when we know the final rules. We expect that almost all clients holding trusts will be required to register from 10th March 2020.
Further information for trustees
If you have any further questions on the Trusts Registration Service, please see this helpful Q&A document from HMRC (via STEP). This covers the current rules, but not the planned changes from March 2020.
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