What is it?
In the simplest terms, TRS is a methodology for trustees to register, when required to do so, with Her Majesty’s Revenue and Customs (“HMRC”).
It provides HMRC with information on the “beneficial owners of a trust”. The details to be provided include personal information on the Settlors, Trustees and Beneficiaries of a relevant trust, as well as some information on trust assets.
It replaces the old paper registrations, widens the scope of who is required to register and was designed to be a principally online system, to make registering with HMRC easier.
When does it start?
TRS became active for the tax year 2016/17.
Any trust which is caught within the scope of the TRS in this and subsequent tax years are required to register by either 5 October or 31 January in the year following the first relevant tax year. The precise deadline is determined by the reason the trust has become a relevant trust.
Due to the late notice and some technical issues, the first year's deadlines were postponed.
What’s its purpose?
TRS was touted as an improvement over the old paper registration service for trusts required to register with HMRC.
The reality is that TRS has massively increased the number of trusts required to register and, whereas previously the only information passed on to HMRC surrounded taxable income, much more information is now required to be submitted to HMRC surrounding the individuals connected to the trust, as mentioned above.
Who does it effect?
It effects relevant trusts.
In brief, a relevant trust is one where the trust has suffered or will suffer a UK tax liability in relation to the preceding tax year.
There are specific taxes covered and these range from income tax through to Stamp Duty Reserve Tax ("SDRT") on share purchases.
It is important to note that the trust does not have to be a UK trust nor have any UK based individuals as Settlor, Trustee or Beneficiary to become a relevant trust
What are the problems?
The TRS system appears to have been rushed through and come in to place before the systems behind it were ready.
A lack of access to the anticipated online system (after the old paper forms were withdrawn) has meant HMRC have had to delay (on multiple occasions) the deadlines for the first year under the TRS scheme.
The online system is now available for UK tax agents; however, it is not available to offshore agents. It is not known if this will be rectified.
This is an issue given the wide-ranging scope of TRS. As mentioned above, there is no need for a UK link for a trust to be required to register under TRS and so, the scenario of an offshore trust with no UK tax agent being caught by TRS is not a difficult one to imagine.
The result, offshore agents must use a paper form to register. Something the TRS was expected to eliminate.
TRS, bringing as it does new considerations for trusts not previously within HMRC's remit, meant considerable guidance was required for acting Trustees and their advisors. Unfortunately, the guidance was late in being released and not entirely clear, leaving many unanswered questions. Indeed, the latest version available, still marked as "draft" was released on 9 October 2017, four days after the anticipated first registration deadline.
TRS clearly brings about an additional administration burden for Trustees and, consequently, more cost for the client. It appears to catch a simple offshore trust with no UK individuals connected to it which has suffered SDRT on the purchase of UK shares in a managed investment portfolio. This being the case, one has to wonder if Trustees will now consider avoiding making any purchases of UK assets which have the potential to bring them within the scope of TRS. Surely not something HMRC will have set out to achieve and clearly at odds with those in Government who want to encourage investment in to the UK.
Whether HMRC's true intentions were to make life easier for agents and Trustees or, just to gather information on trusts with UK assets, it's difficult to see that they have achieved either.
Certainly, the Trustee's life has not been made simpler, they have new rules to consider and an online registration facility that is not available to all.
The information being requested about trusts is often basic, historic and arguably less informative and useful than what they will be receiving under the Common Reporting Standard ("CRS").
It is yet another hurdle for an industry already stretched with the myriad of additional compliance issues that have been introduced over the last few years and a further reason after recent changes to the taxation of UK property to have a long and hard think about trying to invest or do business in the UK.
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