HMRC have provided some updates in respect of the Trust Registration Service (TRS) which is due to go live, in a few weeks time, on 1 September 2022 .
As the registration requirement is a new one and an unfamiliar obligation for many trustees, there will be no penalty for a first offence of failure to register or late registration of a trust. The exception is when the failure is shown to be due to deliberate behaviour on the part of the trustees. In that case or where there are repeated failures a £5,000 penalty may be charged per offence.
What this means in practice is that should HMRC become aware of a trust which has not been registered by the relevant deadline, either because the trust has been registered late or because HMRC have identified it by other means, HMRC may issue a warning letter to the trustees or agent. With effect from 1 September 2022 it would only charge a penalty if that letter was not acted upon.
Similar penalty rules apply to the requirement to update the information held on the TRS.
The following updates have been provided by HMRC :
- HMRC have confirmed the position for non-taxable trusts with a dormant Unique Taxpayer Reference (UTR) who should answer ‘no’ when asked if they have a UTR.
- Another update concerns the position where the trust established in a European Economic Area (EEA) member state is required to be registered on the equivalent Beneficial Ownership Register of that member state.
- Trusts for holding client money and for holding tenant contributions for the purpose of Section 42 of the Landlord & Tenant Act 1987 are excluded from registration as express trusts.
- Certain transactions, for example the sale of land or shares, requires specific formalities to be carried out in order to transfer legal title. Where beneficial title passes on completion but legal title does not pass until those formalities are carried out, the legal title might be held on trust for the relevant part to protect their interests pending completion of those formalities.Trusts created in that context are excluded from registration under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 providing they meet the following legal requirements.: This exclusion applies to a trust created on the transfer or disposal of an asset, where the purpose of the trust is to hold the legal title to the asset on trust for the person to whom the transfer or disposal is being made until the time when the procedure required by law to effect the transfer or disposal of legal title is completed.
- Where individuals (often parents or guardians) open bank or building society accounts for the benefit of a child under the age of 16. This typically creates a bare trust with the individual holding the bank account on trust for the benefit of the minor child. This may also be the case where bank accounts are opened for persons over the age of 16 who lack mental capacity.
- Although there is no general exclusion from the registration for bare trusts, trusts created in the course of opening a bank account for a minor child or person lacking mental capacity are excluded from registration as express trusts. This exclusion only includes trusts created when opening cash deposit accounts but investments, eg: stocks and shares held on trust for the benefit of a minor child, will not qualify for this exclusion.
Just by way of note, not all types of child savings accounts involve trusts, eg: child trust funds and junior ISAs are not trusts and, therefore, are not required to register on the TRS.
From 1 September 2022 trust data requests will be accepted by HMRC and manual TRSM60000 will be updated with a direct link and the data request must be in relation to a specific trust that HMRC is able to identify from the request. The request for information will need to include the name, address and telephone number (or email address), organisation details and address if applicable of the person/organization making the request. HMRC will consider the request and will then release the details if the request fulfils certain criteria, which includes demonstrating a legitimate interest in the trust.
Trustees need to be aware of their obligations and consider whether, for their particular trust, they need to register the trust.
Please do get in touch on 0345 646 0406 or fill in our online enquiry form if you have any queries in connection with the TRS as it is now only just 3 weeks with summer holidays and also a bank holiday between now and then.