New rules regarding Trust registration
Thursday 1 September is the deadline for the new rules regarding Trust registration. Do they apply to you?
Many people’s understanding of a Trust is limited to the more ‘formal’ type, eg. those created by way of a legal deed prepared by a solicitor. However, there are many everyday examples of financial arrangements that come under the definition of a Trust. These include certain investment products and property or securities held on behalf of other individuals. Bank accounts held ‘in trust’ for minor children are also a simple form of a Trust.
Many of these Trusts are impacted by new Trust registration obligations that come into effect on Thursday 1 September 2022. There are some exemptions, thankfully including bank accounts for children, but these are fairly limited. The concern is that some people will not fulfil their responsibilities because they don’t know that they are party to a Trust in the first place.
Trusts Registration Service (TRS)
The TRS is an online system by which trustees and personal representatives are able to register the Trust that they are responsible for with HMRC. It was set up to satisfy the requirements of The Fourth and The Fifth Money Laundering Directives to reduce the risk of Trusts being used for money laundering or terrorist activities. It provides a single point of access for trustees and their agents to record and update information.
Since 2018, UK resident Trusts with any tax liability (such as Income Tax, Inheritance Tax or Stamp Duty Land Tax) have been required to register with HMRC via the TRS.
From 1 September 2022, the registration obligation is extended to include existing UK Express Trusts and some non-UK Trusts, irrespective of any tax liability. The term ‘Express Trust’ really just means a Trust that has been created intentionally, as opposed to an implied Trust which, for example, may be imposed by a court of law. This wide reaching category of Trusts means that, apart from some limited exceptions, trustees of most UK Trusts will need to register with the TRS by this date. This includes Trusts that were set up many years ago and which may have been left dormant or forgotten about. Any Trust in existence on 6 October 2020 must be registered, even if it has subsequently come to an end.
How to register a Trust
As a trustee of a Trust within the new scope of registration, you must register the Trust by the 1 September deadline or, for new Trusts created on or after 2 June 2022, within 90 days. Further details on the information you need to register a Trust can be found here on the GOV.UK website.
Going forward, trustees will need to update the register with any changes, such as additional trustees, change of addresses or new tax liabilities within 90 days of becoming aware of the change. This new 90 day deadline for updates applies to all Trusts, including those already registered who previously only needed to provide an annual update. More information is available here on GOV.UK website.
As already mentioned, certain Express Trusts set up for a very limited purpose are exempt from registration. These include, but are not limited to, UK registered Pension Trusts, Charitable Trusts regulated in the UK, Trusts created by court order, Trusts for vulnerable beneficiaries and bank accounts for minor children. A full list of exempt Trusts is available on the HMRC website.
It is important to understand if these new registration obligations apply to you, as failure to comply may run the risk of receiving financial penalties.
If you have any queries, our team of specialist tax advisers can provide you with further information and assistance.