Compulsory Registration of Trusts

by James MacDonald

4 August 2022

From 1 September 2022, all UK and non-UK trusts with a liability to UK taxation arising from UK income or UK assets, are required to be registered with HM Revenue and Customs’ Trust Registration Service.

Even if there is no tax liability, the requirement applies to nearly all “express trusts”, which are those created by a written deed. There are specific exceptions, but HMRC guidance states that there is no reason for “bare trusts” to be excluded. Bare trusts may not have a written deed but they are commonly used, for example, to hold shares or other property for minor children. Tax liability is not limited to Income Tax or Capital Gains Tax, but also includes Stamp Duty Land Tax and the Scottish and Welsh equivalents, Inheritance Tax and Stamp Duty Reserve Tax. Once registered initially, any changes to the information must be notified within 90 days and there will be a requirement for an annual confirmation that details are correct.

HMRC has said “In recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees, there will be no penalty for a first offence of failure to register or late registration of a trust unless that failure is shown to be due to deliberate behaviour on the part of the trustees.” In practice this means that if HMRC becomes aware of a trust which has not been registered by the relevant deadline – either because that trust has been registered late or because HMRC has identified that trust’s existence by other means – they may issue a warning letter to the trustee or agent. If the trust has not been registered, the trustee or agent should register it at that point. If the trustee or agent then fails to register the trust within the time period stated within the warning letter, or fails to explain why their trust is not liable to registration, a penalty may be issued to the lead trustee.

HMRC intends that penalties for deliberate non-compliance will be applied on a case-by-case basis, but they may be up to £5,000 per breach. Examples of the circumstances in which such a penalty might apply include: continued failure to register a trust following repeated warnings; or providing details on a given trust that are deliberately inaccurate accompanied by continued failure to amend those details. They acknowledge that “the requirement to register with the Trust Registration Service is a new one for many trustees, and we anticipate some trustees will remain unaware of the obligation to register once the deadline has passed. Penalties for failing to register or late registration will only be charged where it can be shown that the failure was deliberate.” Trusts will have to register names, dates of birth, contact details and national insurance number of the lead trustee, nationality, and country of residence.

We do not recommend that anyone should rely on goodwill from HMRC. So, if you are involved with a trust in any way and you are unsure if it is caught by the registration requirement, please speak to your usual Ecovis contact or our Private Client Tax team.

James MacDonald

Senior Manager

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