The Trust Registration Service (TRS)

This sounds like some sort of helpful registration devise for setting up a trust. If you believe that, you are seriously mistaken!

The TRS was introduced a couple of years ago by our friends at HMRC.  The purpose has absolutely nothing to do with being helpful to you and me, rather it is the result of a European Money Laundering directive enthusiastically adopted by our Government and by all accounts not in the sights of any Brexit supporting minister.

 For a long time it has been a widely held view amongst both the mandarins of the European Union (many of whom have only a limited understanding of the Common Law principles of Trusts) and the officials of HMRC, that Trusts are almost exclusively conceived to dodge tax and possibly to launder money on the side. Sadly these principles rather than common sense seem to be the driver behind the TRS.

The basic idea of the TRS is that Trusts (which expression includes many estates) must register with HMRC and where necessary submit tax returns.  The registration has to be done online via the Government Gateway, for the first 9 months of life, the TRS was fraught with technical problems, and however these now seem to have been solved.  To complicate life, any existing trust already registered with HMRC, was required to re-register.  As is so often the case with this sort of registration, it was and remains very easy to accidentally tick the wrong box and subsequently find that your Trust or Estate is issued with a tax return, when none is required.  As many have discovered, to ignore such a tax return is a mistake, even when the Trust or Estate has no tax liabilities. Failure to submit a tax return where one has been issued can very quickly result in nasty penalty notices.  Irrespective of the fact that HMRC now refer to us as “Customers”, we have few rights and failure to deal with such penalties can be an expensive mistake.

The TRS is now being extended to all Trusts.  The current guidance from HMRC is that all trusts, irrespective of whether or not they are active or have any income or gains that need to be notified to HMRC must be registered with the TRS. The time limit for this appears to be 31st January 2021.  Those of us who work in the Legal or Accountancy professions look on in horror as we suspect that HMRC have little or no idea of the floodgates that might be opened by this.

Registering a Trust – Example one:

Many wills contain a trust whereby the matrimonial home / property, or a share in it, is held on Trust for the benefit of a surviving spouse.  This type of property trust has no tax consequences until the surviving spouse dies. Many such trusts already exist and are frequently forgotten about by the entire family or they do not realise it even exists. It appears that this sort of trust needs to be registered with the TRS, so what is going to happen if it is not registered?

Registering a Trust – Example two:

 Many of us buy life assurance for a variety of reasons, to repay a mortgage, to assist a spouse to meet the costs of children in the event of a premature death or to assist our children to pay inheritance tax when we die.  These policies of life assurance are usually written in trust, so they do not form part of your estate when you die and are accessible without waiting for probate.  Once again it seems that this sort of trust, even one where the policy only pays up in quite limited circumstances, must be registered with the TRS.

 Is HMRC really going to enforce the registration of trusts for these and other non-active trusts?  The current guidance says YES! 

Registration of a trust is not particularly difficult but you do have to start by being enrolled on the Government Gateway, after that you have to tackle the registration process itself. Taking great care to make sure that your trust is registered as one that does not need to submit tax returns. 

Should you be making the effort to register a non-active, non-taxable trust? 

The answer here is that we are not quite sure, common sense suggests that at some stage HMRC will realise that this is a bridge too far.  But if they do not, what happens to you if you fail to register?  The standard HMRC answer is to impose penalties on you, but it may be years before HMRC discover your failure at which stage you could face cumulative penalties going back many years.  The writer’s view is that HMRC will see common sense when they realise the task they are setting, and/or all their servers crash as the public tries desperately to register trusts at the last minute!  But can you rely on this, the answer is probably no. 

Given the above we will (where we are aware of registerable trusts) either be taking steps to register them, or to contact clients who we believe are affected.  However we cannot guarantee to contact everyone and it must be down to individual Trustees to consider whether or not their trust required to be registered.

Irrespective of the above anyone who is, or thinks they are the Trustee of a registerable trust should contact us so that we can confirm your position and if necessary assist you with the registration process. Failure to take action potentially leaves you and any co-trustees exposed both to Capital Gains tax and to HMRC penalties.  For further advice and assistance contact a member of our private clients’ team.

Since this article was written it has been announced that the government has formally adopted the latest EU Money Laundering directive which deals with Trust Registration, but that the section relating to Trust Registration is not to be implemented immediately while HMRC cogitate on the problems it will create. 

Herrington Carmichael Private clients department has a good working knowledge of capital Gains tax but we do not claim to be experts and frequently recommend that specialist accountancy advice can be obtained. For further information contact Anthony Tahourdin at 01276 854 947 or a member of the Private Clients’ Team.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.


Graeme Black
Partner, Private Wealth & Inheritance
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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