Partner Louise Nelson, in our leading Wills, Probate, Tax & Trusts team, explains why care must be taken by non-professional Executors following the implementation of the Trust Registration Service.
What is the Trust Registration Service?
The Trust Registration Service (“TRS”) was first set up in 2017 as part of the UK’s implementation of the EU anti-money laundering directives and has now come into effect and been transposed into UK law through the Money Laundering and Terrorist Financing (Amendment) (EU exit) Regulations 2020. The 2020 Regulations took effect on 6 October 2020 and require all UK express trusts (with some exceptions) to register on the TRS, whether or not they have a liability to UK tax.
The requirement to register will affect a large number of individuals and organisations, and is a consideration both for the professionals who are drafting Wills and for those acting as Executors. The complexity of the trusts which must be registered covers a wide range from high net worth trusts with multiple beneficiaries to more straightforward trusts such as those holding modest legacies for children until they reach the age of eighteen.
What deadlines apply?
There are deadlines for registration which differ for taxable trusts dependent on whether they were created before or after 6 April 2021.
Registrable taxable trusts created on or after 6 April 2021 must register within 90 days of the trustees becoming liable to tax, or on or before 1 September 2022 (whichever is later)
Registrable taxable trusts created before 6 April 2021 are required to register by 31 January (or 5 October in some cases) following the end of the tax year in which the trust had a liability to UK taxation.
Trusts that incur a tax liability which triggers registration but have since ceased are still required to register. Trustees should register such trusts on TRS with the required information and then are able to immediately close the trust record to record the fact that the trust has ceased.
Registrable non-taxable trusts in existence on or after 6 October 2020 must register within 90 days of becoming registrable or on or before 1 September 2022 (whichever is later). This includes trusts that were in existence on or after 6 October 2020 but have since ceased. As above, trustees should register such trusts on TRS with the required information and then are able to immediately close the trust record.
There are also deadlines for the notification of any changes to the trust record.
If the trust is taxable you must declare the trust is up to date on an annual basis by 31 January following the end of each tax year in which a tax liability arises. This declaration must include all changes to the additional information required from taxable trusts which took place within that tax year. The remainder of the information on TRS must be kept updated within 90 days of the date that the trustees become aware of changes to the trust details or beneficial ownership.
For non-taxable trusts the information on TRS must be kept updated within 90 days of the date that the trustees become aware of changes to the trust details or beneficial ownership.
Are there penalties?
The current position “in recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees” is that no automatic penalties will be issued by HMRC if the trust is registered late. However, should HMRC become aware of a trust which has not been registered by the relevant deadline (either because that trust has been registered late or because HMRC have learnt of the trust’s existence by other means) then a warning letter may be issued to the trustee or agent. If the trustee or agent then fails to register the trust within the time period stated or fails to explain why their trust is not liable for registration a penalty may be charged to the lead trustee.
HMRC guidance currently states that penalties for non-compliance with be applied on a case-by-case basis and where a trustee has failed to register a registrable trust, a £5,000 penalty may be charged.
Similarly, there is no automatic penalty for failing to keep the TRS register up to date however failure to take action when contacted by HMRC and/or concealing trust data may result in a penalty being issued to the trustees. Failure to act and keep trust data up to date may result in a £5,000 penalty.
Although some types of trust are specifically excluded from the obligation to register, it is expected that HMRC will receive an enormous amount of information as advisers review existing trusts and register with the TRS as needed. Lay Executors and Trustees should familiarise themselves with the rules or take advice if they are unclear as to their reporting obligations.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
