We are all familiar with the need to produce ID documents when opening a bank or building society account, or instructing a solicitor or accountant. Counter-terrorism, money laundering and fraud are key concerns for governments across the globe.
In 2017, as a result of the EU’s 4th Money Laundering Directive, HM Revenue and Customs introduced the Trusts Registration Service (TRS), to step up its systems to combat terrorism and money laundering. The TRS is an online system requiring trustees of certain trusts to provide more information to HM Revenue and Customs, including full details of the beneficiaries. This replaced the old paper system for registering trusts and obliges trustees responsible for any trust which incur an income tax or Capital Gains Tax liability to register on the TRS.
As well as greater transparency, the TRS is part of HM Revenue and Customs ambition to become one of the most digitally advanced tax administrations in the world.
The new registration system has had teething difficulties, partly as a result of the number of trusts that were already in existence that were required to be registered online by the deadlines imposed by HM Revenue and Customs. However, it seems as if most of these initial problems have been overcome which is just as well as the UK government is now agreeing the implementation of the EU’s 5th Money Laundering Directive. This significantly expands the scope of the TRS, widening the definition of trusts that need to be registered such that trustees of all UK express trusts will be required to register these trusts, whether or not a tax liability has arisen.
The trusts that are expected to need registering with the TRS will include discretionary trusts, interest in possession trusts, many types of bare trusts, charitable trusts and employee ownership trusts. This list is not exhaustive and the government has said that the onus will be on the trustees and their agents to determine whether the trust will need to be registered.
The registration dates are yet to be confirmed but the proposals are that unregistered trusts already in existence on 10 March 2020 should be registered with the TRS by 31 March 2021.
New trusts created on or after 1 April 2020 will need to be registered within 30 days of creation. There is still some uncertainty as to how this short timeframe can be achieved and we await further details from HM Revenue and Customs.
In addition to trusts, the TRS is also the system for registering complex estates that have tax reporting obligations during the period of administration. Simple estates can still use the informal reporting method at the end of the administration period but more complex estates now require registering with the TRS before tax returns can be filed and tax paid.
If you are a trustee of an existing trust, or you are thinking about being appointed as a trustee, or if you are dealing with a someone’s estate, it is important to be aware of your obligations to register with HM Revenue and Customs and the tax reporting requirements so that the trust or estate does not incur fines or penalties.
If you would like advice and information about the TRS or trusts and estates generally the Thompson Smith and Puxon Wills and Estates team can be contacted on 01205 574431 or by email at firstname.lastname@example.org.