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New registration requirements for charitable trusts

Anne Wilson, Director, Tax
23/12/2019
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Update  - February 2020
Read our insight following the launch of the new consultation on 24 January 2020.

What charities need to do

Charities will need to check where they stand in relation to the Trust Registration Service (TRS) rules and whether they need to take action.

This will affect any charitable trusts that are not currently registered with HMRC under the TRS, including trusts which are non-taxpaying, may be dormant, or whose funds are administered by another charity. Being registered with HMRC as a charity does not count as being registered with the TRS.

Background

The EU’s fifth Anti-Money Laundering Directive (5 AMLD) is due to come into force in UK law by 10 January 2020.

HM Treasury issued a consultation document in April 2019, proposing how they would implement this directive, and including the requirement for all express trusts (and all charitable trusts) to register with HMRC’s Trust Registration Service.

A number of responses pointed out that this would require the registration of thousands of small, and possibly dormant, charitable trusts that are already registered with and regulated by the Charity Commission. A further consultation in October 2019 was expected, but nothing has been published yet; in the absence of further discussion it is likely that the legislation will go ahead in accordance with HM Treasury’s proposals.

Who needs to register?

Currently, all express trusts that incur a UK tax consequence i.e. that have a liability to pay any:

  • income tax
  • Capital Gains Tax
  • Inheritance Tax
  • Stamp Duty Land Tax (SDLT)
  • Stamp Duty Reserve Tax (SDRT)
  • Land and Buildings Transaction Tax (in Scotland)

must register on the TRS. Charitable trusts with no tax liability are not currently liable to be registered.

However, under HM Treasury’s proposals, the following types of trust will also have to register, regardless of whether or not they have a UK tax liability:

  • all UK resident express trusts (this will include discretionary, interest in possession, charitable, employee ownership and many types of bare trusts)
  • all non-EU resident express trusts that acquire UK land or property on or after 10 March 2020
  • all non-EU resident express trusts that enter into a new business relationship with an obliged entity on or after 10 March 2020.

Express trusts are those whose terms explicitly state that they are a trust, which will include all charitable trusts as they are either set up by will or by trust deed.

What are the deadlines?

For those unregistered trusts already in existence on 10 March 2020, the government proposes a deadline of 31 March 2021 for registration. For trusts created on or after 1 April 2020, the government proposes that the trust should be registered within 30 days of its creation.

How do you register?

Trustees who are required to register must do so online:

https://www.gov.uk/trusts-taxes/trustees-tax-responsibilities

Alternatively the Trustees can appoint an agent to carry out the registration process for the trust:

https://www.gov.uk/guidance/register-your-clients-trust

What information is required?

The TRS will normally ask for:

  • the name of the trust
  • the trust address and telephone number
  • the date the trust was established
  • the country where the trust is resident
  • details of the assets, the settlor, the Trustees, the beneficiaries and any person exercising effective control over the trust, such as a protector or appointor.

What are the penalties for not registering?

Trustees who breach the regulations by failing to register risk both civil and criminal sanctions. The more detailed technical consultation is due to include consulting on a new penalty regime for late registration under the TRS.

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How can we help?

We would urge you to check the potential need to register any trusts not already on the TRS and please do get in touch if you need any help or any further clarification.

If you need help with the registration process we can assist.

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