When it comes to disclosing valid financial information, transparency is no longer a mere act of goodwill, it is a very real legal requirement which is extended to most business structures. It is the job of our government to introduce necessary protective legislations which counteract illegal activities and as our economic climate develops, these measures are extended in a way that can take some people by surprise. Although the primary purpose of establishing a Trust is to ensure secure financial management, some individuals exploit its framework to engage in illicit and unlawful money laundering practices. To counteract these behaviours the British government introduced Money Laundering Regulations (MLRs) in 2017, which includes the Trust Registration Service (TRS) as one of its features. In this article, we will be exploring the importance of the registration of a Trust and explaining the necessary process for the benefit of you and your client.
What is the Trust Registration Service?
There is nothing lucrative or deceitful about this process. Essentially, the service is an online system within which the Trustees of a valid Trust are required to register its details for the benefit of the Settlor (owner/founder of the Trust). The system works in compliance with anti-money laundering regulations and, in more extreme cases, it precautions against terrorist financing.
For non-taxable Trusts that were created before the 6th of October in the year of 2020, the deadline for registration was on or before the 1st of September in 2021; however, there is a reasonable understanding that precautions and a lack of communication have led to a backlog. Given the Settlor’s awareness and a show of willingness to complete the registration, there is leeway within these deadlines. For Trusts created today and any time after the 6th of October 2020, the requirement is that the Trustees ensure the registration of the Trust with the HMRC within 90 days of the signing date which instigates the opening of the estate planning structure.
All Trusts must be registered with the HMRC regardless of tax liability. However, the measures of these liabilities must be outlined to the client to establish their comfort and understanding. Taxes based around Trusts are active in the form of Capital Gains Tax, this being the increase in value of an asset in a Trust which could be liable for tax; Income Tax, most commonly feasible in the form of renting out a property which sits in Trust and gaining an income within the structure itself; Inheritance Tax, this being the tax paid upon passing down sizeable assets such as the client’s property or a large sum of money; Stamp Duty Land Tax; relevant if a house is bought over a certain price within England or Northern Ireland; Land and buildings transaction tax, applying to the purchasing of land and property for both residential and non-residential purposes. One can also note that non-UK express Trusts which are written as such that one of their Trustees has a ‘business relationship’ within the UK, must also be registered.
These taxes are outlined for the sake of your client’s clarity, there are a plethora of measures within tax collection proceedings which many are not aware of and don’t entirely understand. For almost all Trusts there will be no implications or increased tax rates. We aim to outline legislation to provide the client with information and clarity, to avoid their discomfort or a sense of being overwhelmed.
For those who merely wish to protect their primary residence for the sake of their future selves and loved ones, there is nothing to worry about. We simply aim to ensure they carry out the correct measures under the word of the law.
There is only one form of express Trust which is not required for registration, an express Trust being that which is formed and registered as a direct instruction from the Settlor. This is known as a ‘Schedule 3A Trust’. This only applies if the Trust is not liable for UK taxation. Frequently referred to as “Excluded Express Trusts,” these trusts are eligible for an exemption due to various reasons. Most Commonly they are the holding of specific schemes or disputes related to asset distribution. Examples include Pension Schemes or Charitable Trusts created as a formality in the event of a client passing without any estate planning or provisions in place. If the client deciphers that their Trust applies to any exemption, they must claim this through a Self-Assessment.
There is a plethora of extensive information on the government website in the case that a client needs to know the specifics surrounding the exclusion of their Trust registration.
For someone to register a Trust and successfully operate the HMRC services they must establish an Organisation Government Gateway user ID and password. This can be misleading for many clients because it differs from the Individual Government Gateway user ID and password and the two must not be confused upon registration. The process is doable but requires attention to detail and a good background of knowledge regarding the Trust.
To register a Trust, one needs a range of information; the official name of the Trust, the date the Trust was created (the signing date), whether the Trust is a so-called ‘Express Trust’ or not, information regarding any business relationships in the UK (given that the Trust is not already UK based), details of any further UK land or property purchased and put into Trust (other than the primary residence of the client which is more than likely already protected within the structure). Details of the Settlor and their Trustees must be outlined; their full name, date of birth, date of death (if applicable), last known residence and nationality. As previously outlined, the necessary information is not too much of a reach for those who wish to register their Trust without the help of a professional, but the Settlor and their Trustees must be vigilant in their answering and detailing to ensure that their registration is entirely valid and complete.
One must establish who will be the ‘Lead Trustee’ for the sake of the registration. Their detailing is slightly more extensive as this is the person who is responsible for the handling of correspondence received from the HMRC. We advise our clients that this should be someone who can operate an active email address and someone who is experienced in handling paperwork. This can be the Settlor of the Trust or someone who is written into the document as a Trustee. All Trustees are legally responsible for the happenings of the Trust, but the Lead Trust will be the individual who receives the vital detailing regarding the HMRC registration, such as the URN number (Unique Reference Number) – this will be explained in more detail later on in your reading. This will be made obvious to the client should they choose to register their Trust independently and is entirely obtainable.
Understanding the Negative Implications and Outlining the Consequences
The basis of this article and the exposing of liabilities and provisions is for the sake of the £5,000 fine that the client will be left vulnerable to in the face of negligence. Once made aware of the new legislation and its clauses it is important that the client shows willingness in the proceedings of their registration or seeks the appropriate help that they need if they can’t navigate the process themselves.
It is important to be empathetic to those who feel they have been blindsided by this new government legislation and left their estate planning meetings with the idea that their financial outgoings had been settled and underlined. For many people, the idea of a sizeable fine is overwhelming and can instigate feelings of fear. If they cannot afford for someone to complete this registration on their behalf and are also not equipped with the skill set to do so themselves, clients can feel as though they have been put in a suffocating position which has been presented to them without an alternative option. Our conduct and ethics must then come into play, and we must strive to reassure those who hold reservations and qualms with this new form of legality, e.g. calling the HMRC helpline or seeking the help of a family member who might be able to assist them.
How Can TrustDocs Help You and Your Client to Complete This Registration?
At TrustDocs we advise our clients that the process of Trust Registration is by no means impossible, but it does require some finite details which can only be sourced from the original Trust documentation. If the client can acquire this content, then the process can be feasibly done at home and won’t cost them a penny. For some, this is an entirely preferable concept as they are not in a financial position to pay for us to do the registration on their behalf.
We understand this wholeheartedly and encourage those that can do the necessities themselves to do so. However, it is commonplace that members of the public are reluctant to take an active role in the registration of their Trust within the realms of the government website and are either lacking in technological confidence or the understanding of estate planning structures that we have here at TrustDocs. We take the time to converse with clients and provide all information that they seek surrounding the registration.
If and when the client has decided to utilise our services, we take them through the payment process slowly and clearly. We offer customers the choice to pay either via telephone or a payment link, as we understand that many people have reservations when it comes to delivering their card details over the phone. Once this step has been recorded and completed, we run through a detailed questionnaire which ensures we have all of the information necessary to complete the registration. Our processes and quality of practice mean that we leave the exchange with a comprehensive set of instructions and the client is left in no doubt that their Trust will be registered by a team of helpful professionals.
Our admin process means that no Trust is registered without an intricate level of checking as we acknowledge that the registration is a legal requirement and in no way shape or form want to leave any of our clients at risk of being penalised for misinformation. After the registration is complete we then provide another layer of reassurance for those who have put faith in our processes and promise and send a letter to confirm the legal registration of their Trust.
The HMRC also send a letter to every client within 15 working days of the registration. This letter contains what is called a ‘Unique Reference Number’ (URN code), and we ask our clients that they kindly return this number to us at their earliest convenience for safekeeping purposes. This correspondence is vital as the URN is only distributed once, and it is needed for the client to access their Trust information on the HMRC, in the case of future amendments and alterations.
It is important to look past the factual content and to remember that everything we do in the Estate Planning industry is based on benefiting and providing reliable services of the highest quality. New legislation is introduced regularly and will continue to infiltrate our understanding of financial laws and requirements. We must stay vigilant and observant of such, for the sake of our clients and the reputation of our businesses. At TrustDocs we have years of experience behind us, and our company is based around the facilitation and benefit of your business through high-quality processing and production. Our administration department is second to none and we are trusted by a range of companies to focus on the finite details of these legislations and structures. We act with decorum and prove that we are the best at what we do, with a constant stream of positive feedback. Provide your client with the reassurance that they deserve with a bank of information, and let us take care of the rest.