It is important for trustees of both UK and international trusts to be familiar with the Trust Registration Service (TRS) Trust rules.
HMRC’s Trust Registration Service has been extended to include non-taxable trust registration, and the registration deadline of 1 September 2022 is quickly approaching.
If a non-taxable trust is reportable but was established after October 6th, 2020, it must be registered no later than 1st September or within 90 days after being taxable (whichever is later).
Keep reading to see if this will have an impact on your Trust.
Trusts that are required to register
- All UK express trusts, unless they are specifically excluded.
- All non-UK express trusts, that: Acquire land or property in the UK on or after 6 October 2020; and/or gave at least one trustee resident in the UK and enter into a “business relationship” with a UK service provider.
If the trust becomes liable for tax on UK-sourced income or UK-sourced assets while it is not a resident of the UK, you must register the trust.
If all of the trustees are non-UK residents, there is no UK tax duty, and the trust does not directly possess land or property in the UK, registration is not required.
If you live in the UK and are a trustee of a non-UK trust, you should be aware that the trust may need to register if the trustees have a “business connection” in the UK.
What trustees should be aware of
Even if there is no tax responsibility, there may be registration requirements if you are a trustee of a UK trust. You could be taken off guard, for instance, if you serve as a trustee for any of the following:
- Trusts where an individual holds an asset, as trustee for another person, that are documented in a Declaration of Trust.
- Nominee arrangements where an individual holds an asset, as a nominee for another person, that are documented in a Nominee Agreement.
- Where a parent holds assets in a bare trust (such as real estate, investments or premium bonds) on behalf of their minor children.
- Insurance policies with a surrender value that are written in trust will need to be registered, including trusts with investment bonds.
As long as there is no UK tax obligation, a variety of trust types are specifically excluded from being listed on the trust register, including but not limited to the following:
- Trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme;
- Trusts used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured;
- Trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within two years of the death;
- Charitable trusts which are registered as a charity in the UK, or which are not required to register as a charity;
- Pilot trusts that were set up before 6 October 2020, and which hold no more than £100;
- Co-ownership trusts set up to hold shares of property or other assets that are jointly owned by two or more people for themselves as tenants in common;
- Will trusts that are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to two years after the person’s death;
- Trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme; or
- Financial trusts created in the course of professional services or business transactions for holding client money or other assets.
By 1st September 2022, many trusts will need to be registered on TRS. This includes trusts that were established in the past but may have been forgotten about.
If the trust does not register by the deadline, it will get a nudge letter, followed by a reminder letter, and then a £100 penalty for each consecutive failure, and the possibility of heavier penalties if the failure to register is judged purposeful.
If you need advice or support with anything outlined in this article, please get in touch with us at email@example.com and we’ll be more than happy to help you.