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Whilst there is still no fixed date on when the Trust Registration Service (TRS) will be available for non-taxpaying trusts to register, HMRC have recently published a manual providing guidance to your trust clients on their future reporting responsibilities.

Currently, only trusts which have UK tax to pay have to register on the TRS. But that is set to change and many trusts with no UK tax liabilities, including the likes of gift plans, loan plans, and discounted gift plans will also need to register.

However, HMRC do not expect the service to be updated to accept such registrations until autumn this year. The deadlines for registration, originally set at 10 March 2022, will therefore be pushed back to sometime in autumn 2022.

The TRS was established to meet the UK government's obligations to have an anti-money laundering and counter terrorist financing regime to comply with the fourth and fifth Money Laundering Directives (4MLD and 5MLD).

But it also acts as the mechanism by which trustees notify HMRC that the trust has tax to pay. The TRS must be used to obtain a Unique Taxpayer Reference (UTR) for the trust to complete any tax returns. This applies to both new trusts and any existing trusts which have a tax liability for the first time.

To be clear, trustees cannot actually file self-assessment returns via the TRS. These must still be done on paper using SA900, unless they are using HMRC approved software.

Which trusts must register?

There are two separate levels of reporting requirements within the TRS which apply to different classifications of trusts.

The TRS defines these as taxable trusts (those with a UK tax liability) and express trusts (trusts created by written deed). Clearly some trusts will fall in both categories.

Both will need to identify the persons involved with the trust (i.e. settlor, trustees and beneficiaries). However, taxable trusts must also provide additional information on the assets held within the trust at the time of the registration.

Taxable trusts

Trusts which have a UK tax liability already have to register on the TRS. This includes any of the following taxes:

• income tax
• capital gains tax
• inheritance tax
• stamp duty land tax
• land and buildings transaction tax (Scotland)
• land transaction tax (Wales)
• stamp duty reserve tax

These trusts may be created by deed or otherwise. The TRS is already open for these trusts to register. For most trusts, including those that have already registered for self-assessment, the deadline for registration is 31 January following the end of the tax year in which the first tax charge occurs. This is brought forward to 5 October following the end of the tax year for trusts that incur an income tax or CGT liability for the first time and have not previously registered for self-assessment.

The TRS must subsequently be updated in each year the trust has a tax liability. From 2022 onwards, updates will also be necessary each time there are changes to the 'beneficial ownership' information, such as changes to trustees or beneficiaries.

Pension schemes set up under trust may have a tax liability, such as stamp duty, but do not need to register with the TRS provided the trustees keep the scheme details up to date on the 'Manage and Register Pension Schemes service'. In this situation, HMRC considers that the pension scheme and trustees have met their TRS obligations.

Express Trusts

5MLD expanded the reach of the TRS to express trusts even if there is no tax liability.

Express trusts are usually created by a written deed and include the majority of trust plans used with your clients for estate and IHT planning, such as gift trusts, loan trusts and discounted gift trusts, which do not normally have any tax charges (income tax, capital gains tax or IHT) year on year. This is because the underlying asset is often an investment bond which allows tax to be deferred until money is actually withdrawn, although there is the possibility of IHT periodic charges every 10 years or exit charges if the trust assigns the bond to a beneficiary.

These trusts cannot yet be registered until the TRS has been updated. However, should a tax charge of any kind arise on a trust before the updated TRS system is available for use, trustees should continue to register online with the current TRS.

Excluded Express Trusts

There are also some exemptions based on the premise that they don't present much risk, but remember they may still have to register as a taxable trust if any UK taxes are due. Amongst those relevant to advisers include:

• Protection policies, where the only benefit is a sum assured paid out on the death of a life assured (or terminal illness). However, these trusts will be required to register if the policy pays out and the proceeds are not paid out within two years from the date of death.
• Will trusts are excluded from registration as an express trust for the first two years from the date of death. If the assets have not been paid out by this time, the trustees must register the trust. Trustees may still, however, have to register as a taxable trust if there is any tax to pay.
• Bereaved minors trusts and 18-25 trusts which meet the conditions of s71A and s 71D of IHTA 1984
• Registered pension schemes which are tightly regulated by FCA or The Pensions Regulator
• Statutory trusts which have trust provisions prescribed by law, e.g. a trust arising on intestacy
• Personal injury trusts where a personal injury payment has been paid to a trust, subject to certain conditions
• Disabled trusts where beneficiary is a disabled person within the meaning given by Finance Act 2005. Additionally, disabled persons must be the only beneficiaries of the trust.
• Historic pilot trusts. Trusts with a value of £100 or less which were already in existence before 6 October 2020 are excluded. This will include pilot trusts created for the purpose of accepting death benefits from a pension scheme. There is no exclusion for trusts holding a nominal amount where that trust was created on or after 6 October 2020.

Trusts already registered in another EU Member State would also be exempt under UK registration proposals.

Our Practical Guide - Trustee reporting requirements includes a summary of when trustees will be required to complete the TRS for all the key trust types.

Information required

For all trusts required to register the trustees need to provide information on the persons involved in the trust (settlor, trustees and beneficiaries – known for this purposes as the 'beneficial owners') as well as details of the trust itself. In addition, trustees of trusts which have a liability to UK taxation must provide extra information.

These details include names, dates of birth (and date of death if trust created by settlors will), contact details and NI number of lead trustee, nationality, and country of residence. For trusts with no named beneficiary, such as discretionary trusts, a description of the 'class of beneficiaries' must be given, i.e. the description in the trust deed itself in most cases.

Where trust also has a UK tax liability, further information must also be provided on the assets held by the trust and additional information on all the settlors, trustees and beneficiaries.

Once registered on the updated system, trustees will have 30 days from when they are aware of any changes to update the register.

Summary

Your trust clients need to be aware of their obligations to register with the TRS and keep the information up to date. Here is a summary of the common types of trusts which may be encountered and whether trust registration will be necessary.

Registration will be required for most clients who have engaged in IHT planning using a combination of a trust and a bond, such as gift plans, discounted gift plans and loan plans, even though they have no tax liabilities. However, this cannot be done at present until the TRS update has been completed.

HMRC will update the manual in due course once the service is available to these clients, along with the new deadlines for registration.