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Trust Registration: Do you need to register or update?

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United Kingdom

HM Revenue and Customs ("HMRC") operates a trust registration system which is required in order to meet certain of the UK's obligations relating to money laundering.  Employment-related trusts are not known for their use in money laundering operations, however there are no specific exemptions for employment–related trusts and therefore the registration requirements potentially apply to trusts used to provide employee benefits (including holding shares on behalf of employees).  The trust registration requirements are changing and more trusts will now require registration.

To date, notifications will have been made under HMRC's Trust Registration System ("TRS") when establishing any UK resident or offshore employee benefit trust, including an employee benefit trust, employee ownership trust and share incentive plan trust, which is a  'relevant taxable trust'. Trusts which have UK source assets or UK source income on which they are liable to pay UK taxes will be relevant taxable trusts. (This obligation falls on the trustees of the trust and requires a relatively simple online filing through the TRS.)

The establishment of an off-shore employee benefit trust has long been required to be notified to HMRC by any professional adviser involved by way of notification by letter and that requirement continues to co-exist with the TRS.

When a trust becomes liable to pay tax on income or gains a tax return will also be required.

So, for example, an offshore EBT may not currently be registered on the TRS even if it holds UK shares if it receives no dividends, though HMRC will have been notified when it was established if a professional adviser was involved.

Scope of new registration requirement

The trust registration requirements are now being updated to implement further EU Anti-Money Laundering requirements.  All UK express trusts, other than those which are specifically excluded, will now need to register. This means that additional UK and non-UK express trusts which were not 'relevant taxable trusts' will need to register in due course. Share incentive plan trusts have received a reprieve from the new regime, but may still have to register if they are tax paying.

The implementation has fallen a little behind schedule due to world events and final guidance is still awaited. The TRS system has not been updated to allow registration This part of the legislation comes into force on 10 March 2022 and final guidance from HMRC is awaited. 

Updating an existing registration

Historically, HMRC's online system has not had the capacity to allow updates to the information filed when a trust was first registered. In practice this has not been a problem for most trustees as the obligation to update information or confirm there are no updates only currently applies where the trust continues to be a tax paying trust and will therefore be filing tax returns.

However, the TRS has now been upgraded to allow updates to existing registrations and there is a requirement to update details on the online system:

 - if the change occurred before 6 April 2020 and the Trust was liable to tax for any of the three tax years up to 6 April 2020 – by 31 January 2021.
 - if the change occurred/s in the 2020-21 tax year and the Trust was liable to tax in that tax year – by 31 January 2022.

If there have been no changes to the Trust details, but the Trust was liable to tax for any tax year, this is declared on the register by the same deadline as if there had been a change.

If the Trust is not liable to pay any relevant tax for a tax year, the updating deadline is extended to 31 January after the tax year in which the trustees become liable to pay tax again.

If Fieldfisher originally registered your trust, we have been in touch to discuss claiming the online registration.  HMRC have stated that they will take a pragmatic approach to charging penalties for tax paying trusts that file tax returns but have not updated the TRS, which is worth bearing in mind as some difficulties accessing the online system have been reported.

Who can view the information?

The information provided to HMRC via the online filing forms a register and the register is currently open to law enforcement agencies, but not the public. This is one further area where changes are proposed, however access will still only be available where there is a legitimate interest shown, and it appears that this will be interpreted so as to only allow access if the information will further work to counter money laundering or terrorist financing activity.

Making a registration

The trust registrations on the TRS can be made by an agent, such as a law firm or accountant, on behalf of the trustees.  However, the service is changing.  Agents cannot update trust registrations without 'claiming' trusts and undertaking online client authorisation.  That process will require the trustee to set up a Government Gateway account specific for the trust.  Many trustees will therefore find that once they have online accounts it will be most practical to deal with updates as a regular trust administration activity.

If you would like advice or assistance on registration or on record keeping requirements for trustees of employment-related trusts, please get in touch.

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Tax and Structuring