UK government updates TRS manual as deadline approaches

New sections have been added on penalties (TRSM80000), data requests (TRSM60000) and discrepancy reporting (TRSM70000). There are also additional Scottish content and examples at TRSM10030 (Scottish liferent trusts) and TRSM23110 (Scottish property purchase). The manual also now includes answers to some frequently asked questions.

In section TRSM32020, the position is confirmed for non-taxable trusts that, for historical reasons, already have a dormant unique taxpayer reference (UTR). Such trusts could not register as non-taxable if they answered 'yes' to the TRS' question as to whether they have a UTR. HMRC now says they should answer 'no' to that question if the trust has no current tax liabilities.

Section TRSM23150 confirms the position where the trust is established in a European Economic Area Member State and is required to be registered on the equivalent beneficial ownership register of that Member State.

The HMRC position on trusts for holding client money and for holding tenant contributions for the purposes of s.42 of the Landlord and Tenant Act 1987 has been clarified in section TRSM23110 and section TRSM23160 explains the exemption for bank accounts held for minors and the limits to that exemption. Section TRSM10030 gives a list of common types of trust and how they interact with the register.

HMRC amended the TRS manual in June 2022 to add a section on non-UK trusts and capital gains tax on UK property, clarifying that the requirement to register is not triggered by a UK tax liability arising to the trustees from non-UK assets.

However, several questions remain unresolved, according to the Association of Taxation Technicians (ATT). Queries include: the two-year exemption window for estates; when trusts in the context of partnership land and assets need to be registered; whether premium bonds held on behalf of minors are in scope; and whether trusts in existence for a very short period of time need to be registered.

Moreover, the registration process for digitally excluded trustees (those without access to sufficiently up-to-date computing equipment) is still in development.

Recognising that the registration requirement is a new and unfamiliar obligation for many trustees, HMRC has explicitly undertaken to use a light touch in the first few months of administering the new rules. There will be no penalty for a first offence of failure to register or late registration of a trust, except when that failure is shown to be due to deliberate behaviour on the part of the trustees. In that case, or where there are repeated failures, HMRC will reserve the right to charge a penalty of up to GBP5,000 for each offence.

Sources

• ICAEW
• ATT
• UK government
• STEP UK News 21 July 2022: UK government sets out conditions for disclosure of TRS data