Mark Green, Senior Taxation and Trust Manager, HSBC, explains what paraplanners need to know to fully understand what is required to provide support and advice to their trust clients in the wake of the new Trust Registration Service rules.
The Trust Registration Service (TRS), managed by HMRC, is a register of the beneficial ownership of trusts and the legal responsibility for registering and keeping the register up to date falls on the trustees.
This means that paraplanners will be instrumental is helping their trust clients to ensure that the trusts have been registered and ensuring that evidence of the registration is available to the financial adviser and product providers.
The TRS has been in existence since 2017 and applied only to “taxable” trusts; taxable trusts are those which were liable to pay, for example, income tax, capital gains tax, and inheritance tax. The extension of the TRS from “taxable” to include “express non-taxable” trusts follows the UK’s adoption of the EU’s 5th Money Laundering Directive.
What are express trusts
According to HMRC, an express trust is one that has been deliberately created by a settlor and includes discounted gift trusts, loan trusts, gift trusts and any bespoke trust holding an investment bond (whether discretionary or bare trust).
It is important to remember that where the trust fund holds an investment bond, any income tax charged on chargeable event gains are levied on the settlor (which makes it a non-taxable trust for TRS purposes) and if the settlor cannot be taxed then the charge would fall on the UK resident trustees (which then made it a taxable trust).
What trusts do not need to register
There are some trusts which are explicitly excluded from registering on TRS, for example, UK registered pension schemes, pure protection policy trusts and registered charitable trusts. Will trusts are also exempt but the exemption ceases if the trust remains in existence more than two years after the date of death. A full list of trusts which do not need to register can be found in HMRCs Trust Registration Service manual. Please see the link to the manual in the section ‘How to register’.
TRS deadlines
There are deadlines for express trusts to register on TRS, which are as follows:
- Trusts that were in existence on or after 6th October 2020 must have been registered by 1st September 2022
- Trusts set up immediately before 1st September 2022 must register within 90 days of the date of creation
- Trusts set up after 1st September 2022 must register within 90 days of the date of creation
HMRC warns that penalties for not registering or late registration will be charged where it finds the failure was deliberate.
How to register
The first step for the trustees is set up a Government Gateway Organisation account for each trust before they can register the trust. They will need an email address and ideally a mobile phone.
There are four main sections to be completed relating to:
- The trust
- The settlor
- The trustees
- The beneficiaries
Full details of what is required in each section can be found in HMRCs Trust Registration Service manual.
At the end of each section there is a summary of the questions and answers given and an opportunity to make final changes before making a declaration about the accuracy of the information supplied.
Can an agent complete the TRS?
The trustees can appoint an agent to complete the registration for them. The agent must be registered with HMRC. A financial advisor firm can register as an agent.
How to obtain the TRS certificate
The lead trustee can select the option on the TRS register “Get evidence of the trust’s registration”. This evidence is a pdf letter from HMRC confirming that the trust has been registered and provides details about the trust, the lead trustee, the other trustees, the settlor, and the beneficiaries. This document is often referred to as the TRS certificate.
Who needs a copy of the TRS certificate?
Most express trusts undertaking an investment will need to provide a TRS certificate to their financial adviser and the product provider from the 1st September deadline. Where an investment is being made into trust the new rules place on product providers a requirement to check that the trust has been registered and that the details on the TRS certificate and the trust deed are identical. If not, the discrepancy must be resolved.
If it cannot be resolved the product provider may not be able to proceed with new investments, and furthermore, the provider will be required to report the discrepancy to HMRC.
What ongoing duties do the trustees have?
The trustees must ensure that the TRS record is kept up to date, for example, if a trustee retires.
What the TRS means for paraplanners
Although the TRS places additional obligations on trustees, it does not affect the important role of trusts in financial planning. Nevertheless, the TRS will introduce new and permanent obligations for trustees, and it is therefore important that paraplanners fully understand what is required to provide support and advice to their trust clients.
