HMRC and others want to know about your Trust – even with no tax liabilities

Phil Moss, 22 April 2022

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Trusts can take various forms in the UK, and traditionally HM Revenue & Customs (HMRC) have only been concerned that tax returns are filed to capture any tax liabilities.     

Since March 2018, all trusts with a UK tax liability have been required to register under the Tax Registration Service (TRS). This requires the name, residence status and details of assets held by the trust together with names and relevant reference numbers of the trust’s beneficial owners (i.e. settlors, trustees and beneficiaries) to be reported on the register, which is accessible by HMRC and law enforcement authorities.      

Until now, HMRC still had little direct interest in Trusts that didn’t generate tax liabilities, such as bare trusts where any income or gains is declared by the beneficiary or trusts with negligible or only non-income producing assets. 

However, in October 2020, the administrative burden for taxable trusts was increased with the expansion of the TRS when the UK adopted the EU’s 5th Money Laundering Directive (5MLD). In addition, UK (and some non-UK) non-taxable trusts will now be required to register under the TRS by 1 September 2022 and notify of any changes thereafter within 90 days. Notable exclusions include jointly owned property, bank accounts for minors, death benefit policy trusts and existing (but not new) ‘pilot trusts’.         

Therefore, it is important to assess your obligations if you are a trustee or beneficiary of a trust arrangement – including if you are only acting as a nominee or bare trustee for someone else.  

What are the other aspects of these changes?

More details are required to be disclosed to the TRS for taxable trusts by 1 September 2022, including the resident status and nationality of key individuals and details of certain overseas companies controlled by the trust. 

In certain restricted circumstances, anyone can now apply to the TRS to obtain details of the record in relation to a specific trust. 

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Despite the suspicions of HMRC and revenue authorities around the world, the vast majority of trusts are established purely for entirely legitimate reasons (which may have nothing to do with tax) and so these changes may not cause excessive concern other than the increased compliance burden.  

What are HMRC doing to investigate further?

HMRC is keen to feed any information it can access into its Connect database and can be quick to ask questions without first cross-referencing their records. Overall, this is just one further step in the drive for transparency to tax and other regulatory authorities, to which we all need to adapt. 

How can we help?

If you’re looking for further guidance on how these changes will affect you or your Trust interests, please get in touch with Tax Director Aidan Meade (aidanmeade@lubbockfine.co.uk), Tax Partner Phil Moss (philmoss@lubbockfine.co.uk) or your usual Lubbock Fine contact. 

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