Trust Registration Service (TRS): how the new changes could impact you

The Trust Registration Service (TRS) was introduced in 2017 and initially required only taxable trusts to be registered with HMRC. This position changed on 6 October 2020, when the scope of the TRS was significantly expanded. From this date, most trusts are required to register with HMRC, regardless of whether they have a tax liability.

Trusts that fall within the scope of the TRS are commonly referred to as “Relevant Trusts”. Under Regulation 42, a Relevant Trust broadly includes:

• a UK express trust; or
• a non-UK express trust that either receives income from a UK source or holds assets in the UK on which a UK tax liability arises.

The deadline for when a trust must be registered depends on whether the trust is taxable or non-taxable:

• taxable trusts – Must register by 31 January following the end of the tax year in which the trust is created, or by 5 October in the year of first tax liability, if earlier.
• non-taxable trusts – Required to register within 90 days of creation.

Once a trust has been registered, trustees have an ongoing obligation to ensure the information held on the TRS remains accurate. Any changes to the trust details must be updated within 90 days of the change occurring, or by 31 January of the tax year in question. The lead trustee is responsible for updating the TRS record at HMRC, even if they engage the services of a nominated agent to update the TRS on their behalf.

When a trust is registered on the TRS, HMRC will issue a reference number depending on whether the trust is taxable or non-taxable. These references are used to identify the trust when corresponding with HMRC or when managing its ongoing compliance and tax reporting obligations. The format of each reference differs and can be identified as follows:

• non-taxable trusts are issued with a Unique Reference Number (URN) at the point of registration, for example XCTRUST00000026. This is a 15-character alphanumeric code which includes the word “TRUST” within the reference.
• taxable trusts are issued with a Unique Taxpayer Reference (UTR). This is a 10-digit numeric code containing numbers only, with no letters.

While the TRS allows non-taxable trusts to become taxable when a liability arises, it does not currently permit a trust to convert from taxable (UTR) back to non-taxable (URN) once the liability ceases. Historically, trustees or agents addressed this by notifying HMRC and requesting that the trust be marked as dormant, confirming that the trust no longer generates income. HMRC would typically review dormant trusts after five years.

More recent HMRC guidance has introduced a change in approach, suggesting that trustees should close the UTR record on the TRS and re-register the trust as non-taxable in order to obtain a URN. In practice, this approach can be problematic, as closing a trust requires confirmation that the trust has formally come to an end, which may not be the case. Based on discussions with HMRC via the helpline, the practical position remains to retain the trust as dormant until it is formally terminated in accordance with the original trust deed or will.

When the devolution of a deceased’s estate is varied by way of a deed of variation, this may create a new trust as if it were created under the terms of the will. This type of will trust must be registered on the TRS within 90 days of its creation.

If a will includes the words “on trust” when leaving assets to the executors, for example to pay debts, legacies and expenses before distributing the residue to the beneficiaries, this arrangement generally constitutes an express trust. Where any residuary income remains undistributed for more than two years after the date of death during the estate administration, the trust must be registered on the TRS at that point.

However, where a deed of variation simply appoints assets outright and does not create an express trust during the estate administration period, TRS registration is not required.

Certain property arrangements may be excluded from TRS requirements depending on the ownership structure and any subsequent changes.

Where a property has more than four legal owners, all named on the title, the arrangement is generally excluded from TRS registration. If a legal owner dies, the exclusion applies only while the Land Registry update is pending. Once the title is amended, TRS registration will be required.

If the legal and beneficial ownership differ, the trust of land must be registered on the TRS. An exclusion applies where a property is held on bare trust for a beneficiary who is a minor, but this falls away once the individual reaches 18 years old, at which point the ownership must be updated or the trust registered.

Where a property is held as tenants in common and a trust arises under a will, the trust benefits from a two-year exclusion from the date of death. After this period, if ownership remains unchanged, registration is required within 90 days.

HMRC has also confirmed changes regarding Letters of Wishes. Where an individual is granted a life interest in a property, that person must be included as a beneficiary on the TRS, even if they are not named in the will as the life tenant.

Partnerships are not required to register on the TRS where they do not meet the criteria for an express trust. This may apply where:

• not all partners hold legal title to the partnership assets;
• a declaration of trust exists setting out ownership of the property; or
• the arrangement is governed by a partnership agreement that creates express trust obligations.

An exemption from TRS registration can apply where a partner uses partnership funds to purchase property held in their own name, and the property is treated as belonging to the individual rather than the partnership under the Partnership Act 1890. In these circumstances, the arrangement does not give rise to an express trust, and TRS registration is not required.

Under Regulation 44 of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, trustees must keep accurate, up-to-date written records for everyone who qualifies as a beneficial owner of the trust. This duty lies with the trustees themselves and is not an obligation of agents. The records should cover:

• trustees’ details – full names, addresses, dates of birth and national insurance numbers.
• paid advisers to the trust – full names and contact details for those providing legal, financial or tax advice.
• beneficial owner (beneficiaries) details – full names, addresses, dates of birth and national insurance numbers. If the beneficial owner is a company, include the entity’s name, company registration number, UTR (if applicable), legal structure, and registered or principal office.

Trustees must retain their records for five years after the final distribution from the trust. Information held on the TRS is kept for ten years, including after a trust is closed, and is then removed from the register.

The deadline to register a trust is 1 September of the following tax year in which the trust became taxable. HMRC has confirmed that penalties will not apply to those who miss the date due to genuine ignorance. In such cases, trustees or agents may receive a warning letter, but no automatic fine will be issued. However, under HMRC’s updated guidance (TRSM80020), deliberate failures, such as intentionally not registering, withholding information, or providing false details, will attract a penalty of £5,000 per offence.

An estate becomes “complex” if it meets any of the following criteria:

• it is valued at over £2.5 million;
• it generates £10,000 or more in Income Tax or Capital Gains Tax; or
• the proceeds from the sale of assets exceed £500,000 in one tax year. 

The registration deadline is 5 October of the tax year following the year in which the estate became complex. Failure to register within six months after this deadline can result in penalties for executors or agents. These penalties include a fine of up to £300 or 5% of the total tax liability, whichever is higher.