1 September is the Trust Registration Service deadline for a new registry regime. With less than a week to go, Alyson Brooker has set out ten ways to make sure that trustees stay on the right side of the new rules.
Trustees have just one week to register existing trusts under new rules governing the Trust Registration Service (TRS) regime.
1 September marks the hard-stop in a transition process that began with the introduction of new rules in October 2020.
When I published this post last October, there were issues affecting the ability of non-taxable trusts to register. But with those teething problems ironed out and the Trust Registration Service deadline looming, now is definitely the time to make sure you’re aligned with the new rules.
To help, I’ve set out ten things you should consider about the new registration rules.
1. Do clients understand what they must do?
It’s essential that you check that any existing trust clients, or clients who may be connected to a trust – such as those who act as trustees but aren’t settlors or beneficiaries – are aware of their obligations.
2. Stay on the right side of the 90-day rule
New trusts must be registered within 90 days – something we’ve started flagging at The Paraplanners in reports where a new trust is being set-up.
Changes in circumstances – e.g. appointment of a new trustee – need to be updated on the register within 90 days of the change.
3. Most trusts need to register whether they’re liable for tax or not
Historically, only trusts with a tax liability needed to register. But the new rules introduced on 6 October 2020 mean that most trusts now need to be registered, even if they aren’t taxable.
The intention is to create a register of the beneficial owners of assets held in trust, ostensibly for anti-money laundering purposes.
If you’re dealing with a Scottish trust that holds land or property, it’ll also now need to be added to the Register of Persons Holding a Controlled Interest in Land (RCI) unless the current trustees are already named on the Land Register. If the land is on the Register of Sasines, or the trustees have changed, an RCI registration will be required
4. Which trusts need to register?
(a) Most UK express trusts unless they’re covered by a specific exclusion:
- Express trusts include bare trusts (including GIAs under an irrevocable designation for grandchildren etc); discretionary trusts – which include wealth preservation accounts, loan trusts and discounted gift trusts; interest in possession trusts; blind trusts (trusts where the beneficiaries have no knowledge of the trust); employee benefit trusts; protective trusts; new pilot trusts (even if they hold less than £100) and Will trusts (although they don’t need to register until two years from the date of death unless they have a UK tax liability).
- Exclusions include UK pension schemes; life policy trusts that don’t currently hold any value (because a claim hasn’t been made); bereaved minors’ 18-25 trusts (unless a tax liability arises); charitable trusts; child trust funds; disabled persons’ trusts (once again, unless a tax liability arises); statutory trusts; and unit trusts.
(b) Non-UK trusts that have a link to the UK
Non-UK trusts are those that aren’t liable for tax in the UK. However, if they acquire an interest in UK land or a UK business or have a UK resident trustee, they should register. They’d also need to register if the trustees do something to trigger a UK tax liability.
(c) Personal representatives of large estates
Representatives need to complete a Self-Assessment Trust and Estate Return, as registration will give them a Unique Taxpayer Reference (UTR)
5. Be sure of the status of offshore bonds
UK trusts holding offshore bonds need to consider the registration requirements of the bond’s jurisdiction. Republic of Ireland bonds need to register with the Central Register of Beneficial Ownership of Trusts as well as with the UK register. However, UK trusts holding Isle of Man bonds only need to register in the UK
6. Beware of potential penalties for late registration and currency of trust information
Once the trust has been registered, the register has to be kept up-to-date.
In recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees, there will be no penalty for a first offence of failure to register, late registration of a trust or failure to update details on the register unless that failure is shown to be due to deliberate behaviour on the part of the trustees.
If HMRC gives the trust a ‘nudge’ to comply and this isn’t adhered to within the deadline given, there would be a fixed penalty of £100.
Where failures to register are due to deliberate behaviour on the part of the trustees, a £5,000 penalty may be charged per offence.
7. Who can register?
(a) Trustees
Trustees should appoint a lead trustee to be the main point of contact to register the trust (although all trustees remain equally liable for the conduct and compliance of the trust). They can use their own Government Gateway ID but, if they don’t have one, they’ll have to set one up.
If the trust is taxable, it will be given a UTR. If it isn’t it will be given a unique reference number (URN).
The trustee registering the trust will need to know essential personal details of the parties involved, such as the names, dates of birth and contact details of trustees, settlors and beneficiaries, and the type of trust and when it was set-up.
If a trust is taxable, they’ll also have to give details of the trust’s assets.
(b) An agent
Trustees can appoint an agent – such as a solicitor or accountant – to register the trust. Of course, they’re likely to charge a fee for the service. Alternatively, you can use a service like Trustee Support Services, who charge £200. Advisers can’t currently register on the trust’s behalf, but they could offer to sit with the lead trustee while they enter details online.
8. A couple of working examples
Example 1
Mr and Mrs Brown set up a discretionary trust on 1 February 2021 holding an investment bond.
The trustees have now decided to distribute the underlying assets to the beneficiaries by assigning a quarter of the bond’s segments to each of the four beneficiaries.
The trust hasn’t been registered before, as it hasn’t previously been taxable. It needs to be registered by 1 September 2022 under the new rules.
Once the bond has been assigned, the trustees will need to update the register to show that the trust’s been wound-up.
Example 2
Mr Green sets up three investments, one for each of his grandchildren.
The first is a child trust fund for Jill, the second is a GIA that he’s labelled ‘for Joe’ to set aside money to give away later and the third is a bare trust for Janet.
The trustees for Janet’s bare trust would need to register it, but Jill and Joe’s accounts don’t need to be registered.
9. Don’t delay. Get registering today.
Act before the Trust Registration Service deadline – that’s just seven days away!
10. One final thought
Whatever your role in the advice process, now is as good a time to think about the different types of trusts that your clients may hold and build a guide – for use within your firm and a version for clients – that details the elements to think about when setting up a trust.
The Trust Registration Service is just the latest addition to the to-do list for trusts.
That list already includes a host of components that need to be considered: trustees; beneficiaries; lives assured and the number of segments (where there’s a bond); how fees are paid; letters of wishes; investment policy statements; recording the gift and so on and so on.
Links worth clicking
Canada Life has created a Trust Registration Service’s fact find tool – perhaps you could consider creating something similar for clients who need support.
HMRC has published its Trust Registration Service Manual, which is its own searchable in-house manual covering all aspects of the service.
If you need help to meet the Trust Registration Service deadline, start at HMRC’s contact page.