Do s42 LTA Trusts have to register with HMRC?

Trust Registration Service nightmare?

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We have recently started acting for a property managment company with dozens of properties in their portfolio.

Each property is owned by a company and the leaseholders contribute funds to maintenance/service charge accounts.  Under s42 LTA 1987, these funds are held in Trust, usually by the company.

Nothing seems to have been done about registration with HMRC's Trust Regsitration Service but I can't see why they would be exempt from registration - even if they have no taxable income........but....

Even if it were the case that non-taxable cases were somehow exempt, the recent increase in bank interest rates means that the bank accounts in which those funds are kept are starting to accrue interest - in some cases quite a lot of it, several hundreds of pounds.  

I have a horrible feeling that this is a mess.  That dozens of Trusts need registering and dozens of tax returns will be needed.  

Does anyone have experience in this field and can confirm my fears?

Ta.

 

Replies (6)

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By bettybobbymeggie
25th Oct 2023 19:05

If trust registration were required that would then apply to every freehold-owning lease management company in the country. I vote no.

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By Wanderer
26th Oct 2023 03:45

Some discussion back in 2017 here:-
https://www.att.org.uk/sites/default/files/ATT%20Technical%20Briefing%20...
where at point 15:-

Quote:
Concerns have been expressed during Talking Points sessions that in some situations, for example flat management companies, there will be a large number of settlors to disclose. HMRC addressed the point for flat management companies by stating they would not expect many of these to have a taxable consequence to trigger registration.
which infers that once there is tax to pay then registration will be required.

The whole background to the TRS is a stupid piece of legislation which is meant to address money laundering. As if money launderers are going to register their trusts! Classic government sledgehammer to crack a nut which loses sight of the purpose & will be completely ineffective.

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By Wanderer
26th Oct 2023 03:56

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manu...
states that S42 LTA trusts are generally excluded which is backed up by the legislation
https://www.legislation.gov.uk/uksi/2017/692/schedule/3A
"19. A trust holding tenants’ contributions for the purposes of section 42 of the Landlord and Tenant Act 1987."
BUT
https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manu...
states "Note however that a trust that is otherwise excluded from registration under Sch3A is nevertheless still required to register if it has a liability to UK taxation."

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Replying to Wanderer:
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By AndyC555
26th Oct 2023 08:12

Thanks for this.

Doing some reading round, I came across an HMRC consultation response dated 15-3-23 on 'low income trusts' which concluded with 'Next Steps':

"4.1. Following consultation, the government has announced at Spring Budget 2023 its intention to legislate the proposals outlined in the consultation document as part of a package of simplification reforms.

4.2. These reforms will:

provide that trusts and estates with income up to £500 do not pay tax on that income as it arises....."

(But that this change would not apply until 2024-25!)

and also the statement that HMRC would 'consider' the suggestion that "trusts within the de minimis amount would be classed as ‘non-taxable’ trusts" (which presumably would mean they didn't have to register).

I can't find anything later than this. Anyone got any idea where we currently stand?

What a mess!

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By Alfietheaccountant
26th Oct 2023 21:15

If you do not register under TRS then how will you obtain a trust UTR? Trust returns are required (subject to the di minimis limits) and nowadays the only way to get a UTR is TRS registration. I therefore think this needs to be done!

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Replying to Alfietheaccountant:
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By Wanderer
27th Oct 2023 06:51

Most use the company's UTR & make a CT return.

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