HMRC launched its new online Trust Registration Service (TRS) in July 2017, as part of a wider package of anti-money laundering regulations applicable to most professional firms and financial service providers in the UK from June 2017. Since its inception, there have been numerous teething problems with the online registration service and several updates published by HMRC on how the system will work in practice. Trustees need to act now to ensure they will be compliant with the new registration timescales and record keeping obligations.
For new and existing trusts that incurred an income or capital gains tax liability for the first time in the tax year 2016 – 2017, the new registration deadline is extremely close – it is 5 January 2018 (this has been extended twice). In all other years where the same tax liabilities have been incurred, the normal deadline for informing HMRC will be 5 October following the end of the tax year in which the liability arose.
For existing trusts which have previously registered with HMRC for self-assessment purposes, trustees must provide and update the information on or before 31 January after the tax year in which the trustees were first liable to pay taxes. A trust which incurred an income or capital gains tax liability for the year ended 5 April 2017 will find its registration deadline is 31 January 2018. We understand, however, that HMRC has suggested that any trust registering after this deadline, for 2016/17 filing periods only, will not be subject to a penalty provided it has registered by 5 March 2018. This concession is again due to technical difficulties but has not yet been confirmed in HMRC’s official guidance. HMRC is expected to provide clarification on this point.
For those which fall outside this category and where the trust has an inheritance tax or SDLT liability from 6 April 2017 to 5 April 2018 – the registration deadline is 31 January 2019.
As part of the registration process trustees will need to supply HMRC with specific information on the trust which includes a set of accounts, valuations of the trust’s assets at the date they were settled in the trust and details of the trustees.
In addition, the regulations require that trustees keep detailed records on the beneficial owners of the trust, which includes the settlor, the beneficiaries and anyone who exercises control over the trust. Information collected will include their national insurance number, address and passport details. While trustees have, in recent years, already been collating information on beneficiaries for compliance purposes, certain additional information, such as passport or national insurance details, may need to be requested.
The new TRS represents a significant change for trustees and a departure from the previous registration method, form 41G, which is now obsolete. Failure to comply with its provisions may lead to civil and criminal sanctions including the public naming of the trust for failure to comply or imprisonment for up to two years.
It is important to ensure that the correct records are maintained and the trust properly registered. Please contact a member of Penningtons Manches' private client team if you have any questions on this and read the attached briefing for further details on the TRS.