Our overview of the updated Trust Registration Service
In April 2017 HMRC withdrew the 41G (Trust) paper form, the previous way of registering a trust for self-assessment.
The 41G was replaced by the Trust Registration Service (TRS). From April 2017 the TRS became the only way for new trusts or complex estates to register for self-assessment. It was not only new trusts that had to register but also existing trusts with a chargeable taxable event, such as a charge to income tax, capital gains, inheritance tax or stamp duty.
There was no facility to update or change details on the TRS until recently.
Launch of updates to the Trust Registration Service
On 3rd April this year HMRC launched a new version of the Trust Registration Service (TRS). With the new version not only can new trusts still be registered but previous registrations can also now be updated.
The registration of new trusts by agents or trustees is relatively unchanged from before.
The process of updating the register is different and more involved. For agents to make updates on the register on a trust’s behalf, a ‘digital handshake’ is required. Trustees need to authorise agents through a digital process, so the agent can then access the register. The new procedure is intended to be more secure and to help HMRC comply with General Data Protection Regulation (GDPR) requirements. In short an agent has to send a link to a trustee for them to approve and set up digital authorisation. The trustee then follows the link and sets up authorisation by completing a security check. The trustee can do this by either using the existing government gateway account for the trust or setting up a new account if required. Once digital authorisation is approved, the agent can make changes to the register as required.
There are of course trustees who will not be able to complete this digital process, as they do not have internet access or the ability to set up an online account. For the situation where the authorisation cannot be done digitally, guidance from HMRC is still outstanding.
Changes in the beneficial ownership of the trust is one of the requirements for updating the register. Beneficial owners includes, settlors, trustees and beneficiaries/classes of beneficiaries.
For trusts that complete tax returns annually, any updates to the TRS have to be done by 31 January following the tax year of the change. If the trust does not complete a tax return each year, the updates have to be completed by 31 January following the year a return is required.
Changes to the Trust Tax Return
For the last couple of years there has been a box on the trust tax return to confirm any updates to the trust registration during the tax year. This normally was left blank as the facility to make changes was not available. With the system now being live any updates, or confirmation of no changes, will need to be declared on the return before submission.
Expansion of the Trust Register
With the introduction into UK law of the Fifth Money Laundering Directive (5MLD) it is likely more trusts will need to register with the TRS, including those without a liability. There have been consultations with HMRC regarding the scope of 5MLD and the TRS. It is likely that all UK express trusts set up by a settlor will need to be registered. An express trust is a trust deliberately set up by a settlor, usually in writing.
It is unclear whether the following types of trust will need to be registered:-
- Declarations of trust to alter the beneficial ownership
of land, even if there is no income.
- Whilst Trusts containing insurance policies payable on death or terminal illness are excluded, it is still not clear whether trusts with polices that are payable under different circumstances will need to register
There are some types of trust that are proposed to be excluded as they already have to comply with specific tax rules:-
- Maintenance trust funds for historic buildings
- Approved share option schemes
- Vulnerable beneficiary trusts
- Personal injury trusts
- Registered pension schemes
- Charitable trusts
- Trusts registered in the EU under equivalent money laundering directives
It is hoped that trusts for bereaved minors will also be excluded.
It is unclear whether bare trusts, immediate post death interest trusts (with only a share in a property for a surviving spouse) or pilot trusts (with minimal sums settled) will need to register.
It is proposed from 10 March 2022 that all new trusts will need to register within 30 days and also changes to exiting trusts will need updating within 30 days.
This leaves a number of unknowns as full guidance on the types of trust that need to register will not be available until next year. Also it seems unrealistic to expect trusts arising from a death to be registered within 30 days.
As part of the new money laundering directives additional information on already registered Trusts will need to be registered such as the nationality and residency of beneficial owners.
We will shortly be starting the digital handshake process, by sending links to the trustees of trusts we have previously registered. We will then ensure all necessary updates to trusts already registered are completed by 31 January 2021.
We will advise further as soon as we have final guidance from HMRC on how to complete the process when it cannot be done digitally.
If you are a settlor or a trustee of a trust that has not been registered with the TRS but you feel may need to be registered please do hesitate to contact us.