Update: TRS now open to agents

Simon HodgesUpdate: 19 October

HMRC has asked us to disseminate the following:

‘The new TRS is now available for agents to use. As part of this online process, agents will be taken through the steps to create an Agent Services account before they can register on behalf of trustees.

Agents use the link from www.gov.uk/trusts-taxes/trustees-tax-responsibilities to register a trust. As part of that journey, the agent will be asked to create an Agent Services account, and the agents will be directed to request access to the Trust Registration Service by email. The agent will receive a response from HMRC giving them access to Agent Services and some guidance on what to do next. Once they have created an Agent Services account they will be directed to the Trusts Registration iform.

In registering for an Agent Services Account they will have been identified as seeking to access the TRS, and will not be offered the option of linking existing government gateway IDs and client relationships. This is only undertaken by agents participating in the controlled go live of MTDfB.’

We are aware, however, that there are reports that Agent Services – and, therefore, TRS – will not be fully live for agents until the end of October or the beginning of November, though this may be subject to change. We will update members as and when we get more information. In the meantime, we have reported on the TRS issues in today’s Industry News: UK Online Trust Registration Service now available to agents.

Original blog

HMRC has confirmed that, from last night (17 October), the Trust Registration Service (TRS) is now available to agents filing on behalf of trustees. This follows last week’s announcement, that due to technical errors, there were delays in allowing agents access to the system.

HMRC has also confirmed that there will be no penalty imposed where registration is completed after 5 October 2017 but before 5 December 2017. STEP has inquired with HMRC whether there is any potential flexibility in that deadline, and we will update members on the outcome of those discussions. However, at the time of writing, the deadline of 5 December remains.

HMRC’s statement in full:

‘From today, the Trust Registration Service (TRS) is available to agents filing on behalf of trustees. Please see the following link for further details on how to gain access to the TRS: www.gov.uk/trusts-taxes/trustees-tax-responsibilities.

The new TRS allows agents, acting on behalf of trustees, to register trusts and complex estates online and to provide information on the beneficial owners of those trusts or complex estates. The new service, which was launched in July 2017 for lead trustees, replaces the 41G (Trust) paper form, which was withdrawn at the end of April 2017. This is now the only way that trusts and complex estates can obtain their SA Unique Taxpayer Reference. As part of this online process, agents will be taken through the steps to create an Agent Services account before they can register on behalf of trustees.

In this first year of TRS, to allow sufficient time to complete the registration of a trust or complex estate for SA and provide beneficial ownership information, there will be no penalty imposed where registration is completed after 5 October 2017 but before 5 December 2017.

For both UK and non-UK express trusts which are either already registered for SA or do not require SA registration, but incur a liability to relevant UK taxes, the trustees are required to provide beneficial ownership information about the trust, using the TRS, by 31 January following the end of tax year. This means, if the trustees of a UK or non-UK express trust incurred a liability to any of the relevant UK taxes in tax year 2016-17, in relation to trust income or assets, then the trustees or their agent need to register that trust on TRS by no later than 31 January 2018.

The relevant taxes are:
• income tax
• capital gains tax
• inheritance tax
• stamp duty land tax
• stamp duty reserve tax
• land and buildings transaction tax (Scotland).

The new service will provide a single online service for trusts to comply with their registration obligations. This will improve the processes for the administration of trusts and allow HMRC to collect, hold and retrieve information in a central electronic register.

More information is available in HMRC’s September Trusts & Estates Newsletter.

Finally, on Monday 9 October we published our guidance in the form of an FAQ note to help our customers understand the TRS requirements.’

Simon Hodges is Director of Policy at STEP.

UK buy-to-let tax and SDLT changes

cottageSignificant tax changes are on the way for anyone buying a second home or a buy-to-let property in England & Wales. The Scottish and Northern Irish Governments have also unanimously backed the changes, which will come into effect from 1 April 2016.

Robert Jamieson TEP explained the new changes in a STEP seminar for tax planning for businesses held in London on 22 February.

Under the current rules, you are entitled to claim all of the mortgage interest that you pay against the income of your buy-to-let property, and then only pay tax on the remainder, whether it is the basic rate of 20 per cent or the higher rates of 40 per cent and 45 per cent. Other valid expenses can also be deducted before the tax is payable.

However, from next year the calculation of the tax relief is going to be greatly reduced to a flat rate of 20 per cent on the whole income of the property. This will be slowly phased in from 2017 and by 2021 the rules will be fully enforceable. Landlords who pay the basic rate of 20 per cent will see no change, whereas the higher rate tax payers of 40 per cent or 45 per cent will lose 50 per cent or more on their tax relief. These rules do not apply to owners of furnished holiday accommodation or to landlords of rented commercial property (S24 F(No2)A 2015).

From 1 April 2016, higher rates of Stamp Duty Land Tax (SDLT) are also being introduced resulting in an additional 3 per cent on top of the fixed 2014 rates which will be charged on the purchase of both second homes and buy-to-let properties. The Chancellor George Osborne quoted ‘People buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of stamp duty that will be 3 per cent higher on the purchase of additional properties like buy to lets and second homes.’

This increase significantly inflates the stamp duty tax on a GBP275,000 buy-to-let purchase from GBP3,750 to GBP12,000.

The Chancellor has also proposed that from April 2016, ‘wear and tear’ costs will only cover furnishings that have actually been replaced or repairs that have been carried out, with receipts to evidence the expenditure. The current rules are that landlords are given a wear and tear allowance regardless of how much of it they actually use.

These imminent reforms are making it far less attractive for individuals – or financial entities – to invest in second homes and buy-to-let properties. There are, however, two ways in which these charges can be mitigated by using S116(7) FA 2003 ‘multiple dwellings relief’, or the more complicated partnership or LLP arrangement set out in Schedule 15 FA 2003.

Nonetheless, the new rules will disincentivise most landlords from investing further in a rental portfolio when the scope for profit has been cut so significantly.

 

Emily Deane TEP is Technical Counsel at STEP