The fog around HMRC’s Trust Registration Service is thinning

Mon 23 Oct 2017

Emerging through the mists of Autumn is more HMRC guidance on trusts that do not need to register under the Trusts Registration Service (TRS) and the deadlines for those that do.

Key to one part of this clarification is the requirement for a trust to have a “tax consequence”- in clearer words, to be paying tax. This has led HMRC to accept that ‘bare trusts’ do not need to register as ‘no tax liability arises at the level of the bare trust’.  A bare trust is one where the trustees do nothing more than hold the legal ownership of an asset on behalf of a beneficiary who has absolute beneficial ownership and, crucially, is liable for all taxes relating to income from or capital transactions involving an asset.

This doesn’t mean that bare trusts are unaffected by the regulations governing TRS which are made under the cloak of the Government’s anti-money laundering rules designed to ensure that the Government can identify the beneficial owners of assets in structures that would otherwise be opaque. Therefore the guidance does include the comment that the regulations require bare trusts to hold accurate and up to date written records of all the actual and potential beneficial owners of the trust regardless of whether the trust is required to register through TRS.

The guidance also clarifies the deadlines for registering according to the trust’s tax consequences in any year.

• Trusts already registered for self-assessment must register by 31 January 2018
• Trusts not already registered for self-assessment but which have incurred an income tax or CGT liability for the tax year have until 5 October following the tax year end to register (this has been extended to 5 December 2017 for this initial year).
• A trust not registered for self-assessment, but which has incurred an IHT, SDLT, SDRT, or LBTT liability in the tax year must register by 31 January following the end of that tax year.

Once registered, the trust will need to reconfirm or update the information by 31 January following the tax year in which any tax liability arises. Updating can occur more frequently, but there is no obligation to reconfirm anything if nothing has changed and no tax liability has been incurred in the tax year. For trusts with infrequent tax liabilities this may mean the information on the trust register can become out of date before the next obligation to update it. HMRC still expects, however, that trustees will maintain up to date information on the trust in the meantime.