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Do you know if you are a trustee and affected by trust registration service (TRS) ?

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Back in 2017, in order to comply with an EU directive aimed at counteracting money laundering and terrorism, HMRC rather hurriedly launched their online service requiring trustees to register trusts, where a relevant tax liability had been incurred in 2016/17 and subsequent tax years.

A relevant tax liability is where one of the following taxes are due:

  • income tax,
  • capital gains tax
  • inheritance tax
  • stamp duty land tax
  • VAT

The good news was that if you did not have a relevant tax liability, then there was no need to register the trust under TRS.

But that is set to change.

A successive EU directive was issued and is due to come into force by January 2020. The government have committed to implementing this, regardless of any outcome of Brexit negotiations.

This new directive will apply to all “express” trusts (those created by a Deed or Will), regardless of whether there is a relevant tax liability or not.

For new trusts created after 1 April 2020, the trustees will have 30 days to register.

For trusts that exist at 10 March 2020, unless there is a relevant tax liability in the meantime, they will have a later deadline of 31 March 2021 to register.

For trustees actively involved in the running of a trust, they or their advisors should be able to identify whether there is a requirement to report. However, there are numerous instances where a trust may have been created in previous years, which requires little or no involvement by the trustees. Examples of these types of trusts are below, but by no means is this an exhaustive list:

  • Holding a property for a beneficiary to live in
  • Holding shares (typically in a family company) where all dividends are paid directly to the beneficiary
  • “Pilot Trusts” which hold a nominal amount e.g. £10. These trusts may have been established with the intention of receiving assets at a later date such as death in service payments, assets on death from the settlor’s estate, etc.
  • Life insurance policies written into trust
  • Bare trusts
  • Charitable trusts

Professional bodies have estimated that the number of trusts affected by these new rules could exceed 2 million.

The government are currently reviewing the comments submitted to them during the consultation period and will respond in Autumn 2019, likely to be late November 2019

We will of course keep you up to speed with developments but in the meantime if you have any questions or require further information please contact Mark Trevenna on 0114 266 7171.