Lowes Trust Registration Guide

Trust Registration Guide

www.Lowes.co.uk

Content

Introduction. ................................................................................................................................................ 3 Registration requirements for taxable trusts........................................................................................4 Registration requirements for non-taxable trusts...............................................................................5 Deadlines for Registration (non-taxable trusts). ..................................................................................6 Information required for the TRS. ........................................................................................................... 7 The registration process....................................................................................................................... 8-9 Penalties for non-compliance................................................................................................................ 10

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Introduction

The HMRC Trust Registration Service (TRS) the TRS became operational on 13 July 2017 and was originally launched in order to fulfill the Governments obligations under the 4th Money Laundering Directive (“4MLD”).

Following the implementation of the 5th Money Laundering Directive (“5MLD”) in January 2020 trustees of ‘non-taxable’ trusts will also now be required to register with the HMRC Trust Registration Service (TRS). The term ‘non-taxable’ trusts is used here to describe trusts which have not yet incurred a tax liability, not to describe trusts that are in some way exempt from taxation.

As a result of 5MLD the legal responsibility for registration lies with the trustees. The extended requirements now means that more or less all UK trusts will need to register, although there are certain ‘excluded’ trusts which will be exempt from the requirement. These are covered later in this guidance document.

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Registration requirements

5MLD significantly expanded the scope of the trusts which are required to be registered on a central register (In the case of the UK this is the HMRC Trust Registration Service (TRS)) as well as the range of people who can access the information contained in the register.

All trusts that don’t fall into the following categories will required to be registered.

• Trusts used by government and other UK public authorities • Trusts for vulnerable beneficiaries or bereaved minors

UK trusts

The original HM Treasury Consultation on the transposition of 5MLD stated that all UK express trusts would be required to register, however, following a consultation document HMRC has proposed to exclude the following types of trusts from the obligation: • Statutory trusts: Some trusts are not created through a settlor’s express intentions but arise because of statutory provision. An example is an intestacy where statute introduces trusts to protect the interests of minor children. • UK registered pension scheme trusts will not be required to register on the TRS due to the low risks of AML or terrorist financing but pension scheme trusts that are not registered with HMRC on ‘Pension Schemes Online’ or ‘Manage and Register Pension Schemes’ will be required to register on the TRS (for example, unapproved schemes such as Employer Financed Retirement Benefits Schemes (EFRBS))

• Personal injury trusts

• Save as you earn schemes and share incentive plans

• Maintenance fund trusts

• Certain trusts incidental to commercial transactions

• Certain trusts used as part of financial markets infrastructure

• Authorised unit trusts

• Co-ownership trusts – where the trustees and beneficiaries are the same persons • Will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy and are wound up within 2 years of death • ‘Pilot’ trusts set up on or before 6 October 2020 holding assets valued at less than £100 or less or until further assets are added. New pilot trusts set up after this date (e.g. ‘spousal by-pass’ trusts will

• Charitable trusts

• Pure protection life insurance policies and those paying out on critical illness or disablement (including group policies)

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not be excluded from the requirements and will need to be registered UK trusts that are not excluded from registration are known as “Type A” trusts. Non-UK Trusts Under the regulations certain non-UK express trusts will also be required to register on the TRS. These are trusts that do not fall within the above list of ‘excluded’ trusts. • “Type B trusts” - Non-UK trusts which have at least one trustee resident in the United Kingdom (and not otherwise excluded from registration) and either: o Have a business relationship with a relevant person; or

o Have acquired an interest in land or property in the UK

• “Type C trusts” - Non-UK trusts where none of the trustees are resident in the United Kingdom and have acquired an interest in land or property in the UK The definition a ‘relevant person’ is a person subject to the Money Laundering Regulations and the definition of a ‘business relationship’ is where there is a business, professional or commercial relationship that arises out of the professional activities of the relevant person and is expected to have an element of duration (in HMRCs view this is at least 12 months). For Type C trusts the above definitions mean these trusts will not be required to register if their only link to the UK is through a business relationship with a UK based adviser.

Deadlines for registration (non-taxable trusts) Following delays in amending the registration service to accommodate non-taxable trusts, HMRC have confirmed that the deadlines will be as follows:

The reason for the two separate criteria under the second bullet point is that this enables trusts that were created in the 90 days before the 1 September 2022 deadline sufficient time to register. (e.g. A trust created on 26 August 2022 will have to register by 24 November 2022). In practice though, this means that non-taxable trusts created on or before 2 July 2022 will need to have registered by 1 September 2022. Any changes to the trust details or circumstances must be registered within 90 days of the change.

• For non-taxable trusts created on or before 6 October 2020 – by 1 September 2022 • For non-taxable trusts created after 6 October 2020 but before 1 September 2022 the later of: o 1 September 2022; or o 90 days from the date the trust was created • For non-taxable trusts created on or after 1 September 2022 - within 90 days

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Information required for the TRS

The following information table outlines the information that needs to be submitted for trust registrations (whether being registered as a taxable or non-taxable trust).

(C) Additional information required for Taxable trusts ONLY • The country of general administration of the trust • Details of liability to Income Tax and Capital Gains Tax • Information on the assets held by the trust o Money o Property or land (description and estimated current value) o Shares o Businesses and companies o Other assets • National Insurance number (UK citizens) • Passport number (Non-UK citizens) • Address - If the address is not in the UK, passport or identification card details will have to be provided.

(A) Category

(B) Information required (ALL trusts)

• Trust name [e.g. “‘The Whiteacre Settlement] • Date the trust was created • Whether all or some of the trustees are UK resident • Whether any of the settlors are UK resident • Whether the trust acquired UK land or property since 6 October 2020 • Whether the trust is already listed on a European Economic Area (EEA) register [see Note 1] • Does the trust have a business relationship in the UK? [See Note 2] • Full name • Date of birth • Contact details -Address/Tel. No (Lead trustee only) • Country of Nationality [See Note 3] • Country of residence [See Note 4] • National Insurance number (lead trustee only) • Mental capacity • Business/organisation name • Unique Taxpayer Reference (UTR) – [UK businesses]

(1) Trust details

(2) Trustee details (individual trustees)

• Unique Taxpayer Reference • Address

(3) Trustee details (corporate trustees)

• Contact details (lead trustee only) • Country of residence [See Note 4]

• Full name • Date of birth • Date of death (where trust set up after settlor has died)

• National Insurance number (UK citizens) • Passport number (Non-UK citizens) • Address - If the address is not in the UK, passport or identification card details will have to be provided.

(4) Settlor details (individual settlors)

• Country of Nationality [See Note 3] • Country of residence [See Note 4] • Mental capacity • Business/organisation name • Country of residence [See Note 4]

• Unique Taxpayer Reference • Address

(5) Settlor details (where settlor(s) is/are businesses or organisations)

• Full name • Date of birth

• Country of Nationality [See Note 3] • Country of residence [See Note 4] • Mental capacity

• National Insurance number (UK citizens) • Passport number (Non-UK citizens) • Address - If the address is not in the UK, passport or identification card details will have to be provided.

(6A) Beneficiary details (individual (named) beneficiaries)

Note - Some named beneficiaries will only benefit when a certain ‘contingent’ event happens, such as when another beneficiary dies. These beneficiaries will need to be included in a class of beneficiaries (see 6B below) until the event occurs. At that point, their details will need to be updated on the register as a named beneficiary.

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• Description of the class of beneficiaries (e.g. – there may be classes such as settlor’s spouse, children, grandchildren etc rather than (or in addition to) named individuals). If it is a discretionary trust there will be no named beneficiaries. Therefore please state that the trust is discretionary.

(6B) Class of beneficiaries

• Unique Taxpayer Reference • Address

• Name of charity or trust • Country of residence [See Note 4]

(6C) Beneficiaries that are charities or trusts

• Business/organisation name • Country of residence [See Note 4] • Description of beneficiaries [See Note 5] • Description of the beneficiary • Country of residence [See Note 4]

• Unique Taxpayer Reference • Address

(6D) Beneficiaries that are companies or employment related

(6E) Other beneficiaries (those that cannot be recorded under 6A-6D)

• Full name • Date of birth

• National Insurance number (UK citizens) • Passport number (Non-UK citizens) • Address - If the address is not in the UK, passport or identification card details will have to be provided.

(7) Individuals that have control over the trust

• Country of Nationality [See Note 3] • Country of residence [See Note 4] • Mental capacity

Note 1: [Whether the trust is registered on another EEA register]: This question is asking whether the trust is already listed on one of the registers in an EEA country a some of these countries have their own register of trusts. Trustees are not required to provide a reference number or other verification [The EEA includes all countries within the European Union (EU) and also Iceland, Liechtenstein and Norway]. Note 2: [Does the Trust have a business relationship with a UK relevant person]: This question is only relevant if the trust is a non-UK trust with at least one UK-resident trustee. This question is only asked if the trust has non-UK trustees or a mix of UK and non-UK trustees and a non-UK settlor. Note 3: [Nationality]: This is the country of which the individual is a national. In most cases, this is where the individual was born and where their passport is issued. Some individuals may have dual nationality and if so, selecting either country of nationality is acceptable. The only exception is if one of the countries of nationality is the UK in which case trustees must select the UK and not the other country. Where recording the nationality of a settlor who is deceased as at the date the trust is being registered, their nationality at date of death should be used. Note 4: [Residence]: Individuals - This is usually the country where the individual lives and works most of the time during the tax year. If there is any doubt, trustees can check whether an individual is UK

resident through the Statutory Residence Test (SRT). For more complicated cases where the residency of the individual changes between tax years, HMRC will expect TRS to be updated with that change once the position for that tax year has been established as part of that individual’s ongoing tax obligations. Some individuals may have more than one country of residence, as defined by the laws of each of those countries. If so, selecting any country of residence is acceptable. However, if one of the countries of residence is the UK, trustees must select the UK and not any other country. Businesses (or other organisations such as charities) - This iswherethebusiness isregisteredor incorporated. A company is treated as having UK residency for TRS purposes if it is registered with Companies House. For other businesses or organisations, select the country where the principal or main office is located. Note 5 : [Beneficiaries that are companies or employment related] This should confirm if the beneficiaries are a specific class of employees of the business. For example, ‘All current employees of X Ltd and their families’. Trustees will also need to know approximately how many individuals are in this class of beneficiaries. If the beneficiaries are specified by name or are otherwise individually identifiable (for example directors), they should instead be recorded as individual beneficiaries.

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The registration process

In order to register a trust on the TRS trustees will need to take the following steps:

Step 1

Set up a Government Gateway user ID for the trust. Please note before an individual can register a trust as a trustee, they must have an Organisation Government user ID and password. This can be created the first time the individual registers and the trustee will need a Government Gateway user ID for each trust they would like to register. To create a Government Gateway user ID please click here, then click “create a sign in details”.

*Important note* - Any trustee who already has a Personal Tax Account in their own name (i.e. – already has a Government Gateway ID for their personal tax affairs) needs to be aware that the trust’s credentials are completely separate to their own. The trust needs to set up its own Government Gateway which needs to be an account for an organisation.

Step 2

Complete “create sign in details” process to obtain your ID. Please note the trustee will then be asked for details of their own email address and name and to set up a password and recovery word. They will then be issued with a government gateway

user ID - all before they tell HMRC what the ID will be used for. Once the user ID has been created, the trustee will be asked for the type of account they need. The correct account to select for a trust is ‘organisation’.

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Step 3

The trustee needs to ‘claim’ the trust. In order to achieve this the trustee will need to go to the Manage your trust’s detail page by clicking

here and click on the “Start Now” button at the bottom of the page and log into their Government Gateway to start the claiming process.

If this is the first time they have logged into their Government Gateway, an account type

(organisation must be selected) and further security measures will need to be established.

Step 4

The next stage is to fully claim the trust and the trustee will need the following information to hand: • The trust’s UTR (or UTN) • Details of the trust’s original registration During this process the trustee will be asked to provide details that HMRC already knows about the trust from the original registration (or the latest update) in order to ‘claim’ it. This could be the name, date of birth and national insurance number of the lead trustee or another person associated with the trust which could be one of the trustees, beneficiaries or settlors. The trustee can check the details entered and will be told if they have successfully claimed the trust.

If the trustee does not enter the correct details, they will get a message that their answers do not match the details HMRC holds about the trust. Trustees will have three attempts to enter the correct information. If they are unsuccessful after the third attempt, they will be locked out and will have to repeat the process after 30 minutes. Please note that we are unable to provide guidance beyond this point as this would require full access to the Government Gateway system and as an organisation we have no registration obligations of our own that would require us to register.

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Penalties for non-compliance

HMRC acknowledge that many ‘lay’ (non-professional) trustees will be unaware of their obligations and that therefore a proportionate approach is required – Penalties for non compliance therefore aim to reflect this fact, whilst serving as a sufficient deterrent.

The penalty regime for trusts required to register under 5MLD is: • Failure to register - For the offence of failure to register there is no financial penalty, but a notification (‘nudge’ letter) would be sent to the trustee setting out their responsibilities. It should be noted, however, that this would only be the case if this was a genuine mistake and where a trustee is found to have failed to register on time deliberately, they would receive a financial penalty rather than a notification. • Failure to update details - For a first offence the trustee would receive a notification, but for a second or subsequent failure a penalty of £100 would be levied for each offence. Where there are deliberate offences, however, the trustee is likely to receive a financial penalty rather than a notification.

Note: The TRS currently has penalties based on the self-assessment penalty regime for failure to register taxable trusts on time. The fixed penalties for an administrative offence are: • Registration made up to three months after the due date: £100 penalty. • Registration made three to six months after the due date: £200 penalty. • Registration more than six months late: either 5% of the total tax liability or £300 penalty, whichever is the greater.

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