Trust Registration Service – where are we now?

The UK’s Trust Registration Service (TRS) was introduced in 2017, to comply with anti-money laundering regulations and aid international tax transparency regarding beneficial ownership.

All existing trusts, regardless of whether they are ‘taxable’ or ‘non-taxable,’ had to register by 1 September 2022, unless they qualified for an exemption. HMRC statistics show that around 200,000 trusts and estates had registered by this date, although it is likely that not all registrable trusts have met this deadline. New trusts set up after this date are generally required to register within 90 days.

The registration conditions are broad and cover many forms of express trusts (i.e., those created deliberately by a settlor), including non-UK trusts that have UK based trustees, own UK land or property, or enter business relationships with UK entities. Trustees are also responsible for updating TRS data within certain timeframes; when changes to the trust details or beneficial ownership occur, depending on whether the trust is taxable or non-taxable.

Penalties for missing reporting obligations

HMRC may now charge penalties for failing to register a trust, or update information held on the register.

The initial failure to register or failure to update information generally will not attract a penalty unless it is caused by the deliberate behaviour of the Trustees. If after being approached by HMRC, the Trustees continue to either fail to register the trust or update information held on the register, penalties of £5,000 may be charged at HMRC’s discretion.

When the TRS was first introduced, HMRC confirmed that criminal action could be taken for non-compliance caused by dishonest or fraudulent behaviour.

What to do if you have missed the reporting obligations

Under current practice, HMRC will not charge a penalty for the initial failure to register or update details on the register. However, it is strongly recommended that a late registration or notification of changes is submitted at the earliest opportunity.

Trustees should retain a copy of the most recent information submitted to the register and regularly review this against any changes to the trust. Details must be updated within 90 days of a change occurring and declared via self-assessment if the trust is taxable.

If there is any uncertainty about whether a trust needs to be registered, professional advice should be sought at the earliest opportunity. Trustees should not wait for HMRC to contact them about incorrect information.

HMRC activity

HMRC may receive requests for data from the TRS from overseas tax authorities and other enforcement agencies, although generally a legitimate reason under money laundering regulations must be demonstrated before HMRC will share relevant information on beneficial owners with third parties, subject to data sharing safeguards.

It is likely that HMRC will use data from the TRS in conjunction with the Register of Overseas Entities (ROE), which was introduced in 2022 and requires offshore entities owning UK property to register details of beneficial ownership. HMRC will likely use both registers to verify information against other databases such as Land Registry and identify structures and arrangements involving trusts that may present a risk of tax non-compliance.

The requirements for registration are complex, and new trustees may not be aware of their obligations. Please contact Richard Bull your usual Crowe contact for further advice.