New rules come into force on the 1st September 2022 that make it necessary to register most types of Trusts with HMRC, including Trusts which do not produce an income. Changes to the anti-money laundering regulations mean that many more Trusts will be required to register than before. Failure to register a Trust in time may result in penalties.
Trustees are now required to register their Trust under HMRC’s online portal, the Trust Registration Service (TRS). Previously, Trustees were usually only required to register their Trust under the TRS if the Trust was liable to pay any UK tax.
In terms of registration, all Trustees named in the Trust are equally responsible, but a lead Trustee can be nominated to be the main point of contact for HMRC. Before a Trustee can access HMRC’s online portal they will need to apply for a Government ID which will enable them to use the Government gateway account. The Trustees will need to provide HMRC with some basic information including its assets, all relevant parties and beneficiary details.
You can find out more at the Government’s website here https://www.gov.uk/guidance/register-a-trust-as-a-trustee
What is a Trust?
A Trust is a separate legal entity and can be used to manage assets which can include investment, money, land/or property. Trusts can be used to protect family assets or pass assets to your beneficiaries in a will. There are a variety of Trusts, and these are taxed differently. A Trust is usually set out in a document which refers to the settlor, Trustees, and beneficiaries of the Trust deed.
Which Trusts need to be registered?
Trusts that now need to be registered are all UK express Trusts (unless exempt).
There are certain Trusts that do not need to be registered (unless the Trust is liable to pay UK tax). These types of Trusts include some of the following:
- Trusts that are set up to hold money from UK registered pension scheme (for example Occupational pension scheme).
- Certain charitable Trusts.
- Pilot Trusts created prior to 6 October 2020 and hold no more than £100 (however, if created after 6 October 2020 this may need to be registered).
- Trusts that are used to hold retirement or life policies (providing the policy only pays out upon death, critical or terminal illness or permanent disablement, or to meet the healthcare costs of the person assured).
- Trusts for bereaved minor or adults aged 18 to 25 set up under the Will (or intestacy) of a deceased parent.
- Certain co-ownership Trusts that are set up to record the beneficial interest held in property or other assets (unless both the Trustees and legal owners are different).
Deadlines for registering a Trust
- Non-taxable Trusts – Where a non-taxable Trust was created prior to 6 October 2020, the deadline for registration is 1 September 2022. For Trusts created after 6 October 2020, registration must take place within 90 days of creation or of incurring a tax liability or on or before 1 September 2022, whichever is later.
- Taxable Trusts – For taxable Trusts created on or after 6 April 2021, registration should be within 90 days of the tax liability arising or on or before 1 September 2022, whichever is later. For Trusts created before 6 April 2021, registration should be on or before 5 October in the tax year after the one in which the Trust started to receive income or incurred a capital gain.
Penalties
Initial penalties are likely to be in the region of £100 for registrations that are 1-3 months late and £200 where they are 3-6 months late. Where a registration is more than 6 months late, the penalty is expected to be £300 or 5% of the tax liability, whichever is the greater.
How we can help
Anyone already acting as a Trustee of a Trust that hasn’t yet registered must consider whether the Trust is now registrable. Similarly, anyone seeking to set up a Trust should consider the rules, as registration and maintenance of the TRS will be a further administrative task for the Trustees in the future.
THP Solicitors represent clients in setting up and administering Trusts. We can advise you in respect of Trust registration and ensure that you are fully compliant with the new legislation. For more information please contact Shirah Blackwood (Lower Earley office) on 0118 338 3263 or Victoria Baker (Henley office) on 01491 570900.