Certain trusts are now obliged to register online with HM Revenue and Customs through the Trust Registration Service (TRS).
The registration requirement extends to employee benefit trusts (EBTs) (whether they are UK resident or not) if they receive UK source income on which UK tax is payable. This will include, for example, employee-ownership trusts (EOTs) and share incentive plan (SIP) trusts, if they have UK taxable income.
These obligations arise under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017).
A trust does not need to be registered if:
- there is no UK income arising; and
- there is no likelihood of the trustees being liable to pay UK taxes in the foreseeable future.
Thus, a SIP trust will not usually be a “taxable relevant trust” for the purposes of MLR 2017, since it will not normally be liable to tax on dividends or capital gains. However, if, for example, the SIP trust retains shares which are unallocated after the end of an applicable period, it will be liable to tax on dividends and capital gains in relation to those shares. On that basis, it will, therefore, become a taxable relevant trust.
The trustees of an EBT that is a “relevant trust” will be obliged to:
- maintain records including details concerning the beneficiaries of the EBT; and
- provide information to “relevant persons” (such as financial institutions and tax advisers) and law enforcement authorities, when required to do so.
Registration must take place through HMRC’s online TRS portal, and the trustees must have a Government Gateway ID. There are separate registration pages for new and existing trusts. For an existing trust, the trustees must provide the existing self-assessment unique taxpayer reference number (UTR) for the trust.
The trustees will have to specify the type of trust which is being registered. An EBT will normally be an “employment-related trust”.
Trustees are obliged to identify the beneficiaries under a trust. However, the guidance issued by HMRC indicates that, where the number of beneficiaries under an EBT exceeds ten, the trustees are permitted to identify only the class of beneficiary. Nevertheless, individual directors and “key employees” must be listed as individual beneficiaries. HMRC has provided guidance on its interpretation of “key employees”.
EBTs which have previously registered with HMRC using the now discontinued paper Form 41G must register again using TRS. This is because the Form 41G does not contain all the details that are required under MLR 2017.
HMRC’s guidance states that, generally, trusts must be registered by 5 October in the tax year after they are established, or, if later, when a trust starts to make income and gains.
However, the guidance also confirms that, in the first year of the TRS, no penalty for late registration will be imposed for registrations after 5 October 2017 provided registration is completed by 5 December 2017.
Trustees should, therefore, be checking now as to whether they are subject to an obligation to register a trust under MLR 2017.
The details of MLR 2017 and the latest HMRC guidance can be found by following the links below: