Registering a Trust: new rules on their way

 27 October 2020
Registering a Trust: new rules on their way

New rules will require any Trust to be registered with HMRC by 2022, regardless of whether it is income-producing or not. 

How will this impact me?

If you are a Trustee, this applies to you. You need to ensure that the Trust you look after is registered with the HMRC UK Trust Register by 10th March 2022. 

You and any fellow Trustees are already responsible for reporting, paying and keeping records of tax paid on behalf of the Trust, and providing the beneficiaries with a statement of the tax paid. 

You may have agreed to be a Trustee years back on a Trust that only comes into effect if a person dies. So, it’s worth checking what Trusts you are a Trustee of (if any) and ensuring they are registered. It’s also an opportunity to deal with any old or now-redundant Trusts, to ensure you are not hit with an unexpected tax bill or a fine.

When did all this happen?

You may be forgiven for not being up to date on all this, as the UK Trust Register was only created back in 2017. The Register

"fulfils the UK’s obligation under the EU’s Fourth Money Laundering Directive to maintain a central register of the beneficial ownership of tax paying trusts." 

If you as a Trustee “inadvertently” fail to register a Trust or update its information, HMRC will write to you and remind you. If you fail to do so after that, there is a fine of £100 levied for each failure to comply. 

As an article by MacFarlanes says:

“These changes will create significant additional compliance obligations for many trustees. Many non-professional or overseas trustees are likely to be unaware of their obligations"

Registering a new Trust in 2020

Under the current legislation, a Trust must be registered if it becomes liable for the following types of tax:

At present, you do not have to register any Trust that meets the following criteria:

  • Pays Income Tax of less than £100 on interest
  • Only the settlor or beneficiary of the Trust pays tax
  • A bare Trust
  • A charitable Trust
  • A resulting Trust where all the beneficiaries have died so the assets are returned to the settlor 
  • A statutory Trust made through legislation
  • A constructive Trust imposed by a court
  • The Trust holds a pension scheme already registered with HMRC

At present, a new Trust that is liable for either Income Tax or Capital Gains Tax must be registered with HMRC by the 5th October in the tax year after the Trust was first liable for either of these taxes. 

Registering your Trust(s) for 2022

Much of this is set to change by 2022. The most significant changes will be to the timescales for registering trusts, and their subsequent tax liability.

Timings

  • Any Trust that exists on 10th March 2020 must be registered by 10th March 2022.

  • Any Trust set up after 10 March 2020 must be registered within 30 days or by 10th March 2022, whichever is the later date.

  • From 9 February 2022 onwards, all new Trusts will be required to be registered with the Trust Registration Service (TRS) within 30 days. 

Tax

  • All trusts will need to register regardless of whether they have tax liabilities or not. 
  • Trusts that are already registered will need to provide additional information about the “beneficial owners”.

The updated registration service is not however due to be available until sometime in 2021, so nothing can be done until then.

Why is this happening?

These changes have been made in response to the Fifth EU Anti-Money Laundering Directive (5MLD). The number of trusts affected was reduced after a consultation received objections from professional bodies. The requirement has now been updated such that the following types or trust are now excluded from compulsory registration.

  • “Will trusts created on death which only receive assets from the estate/death benefits life insurance. They should be wound up within two years.
  • Critical illness and disablement and pure protection life insurance policies.
  • Registered pension schemes.
  • Existing pilot trusts holding less than £100.
  • Trusts for joint ownership of property.
  • Charitable trusts.
  • Personal injury trusts."

However, just to confuse matters, the exemptions are made assuming that the Trust is already registered under another system (such as charitable Trusts) or that there is a low risk of that trust being used to fund terrorism or launder money. Equally, if an exempted Trust incurs has UK tax liabilities, it will still have to register. 

Confused about the new 2022 Trust registration rules?

We’re not surprised! Call us to discuss details of your liabilities as a Trustee or if you are concerned about any Trusts you have set up already. We offer an initial consultation online, and are happy to help you sort out your Trust registrations well before the March 2022 deadline. 

We will keep an eye on the developments of this new rule, and provide further updates when known. Sign up to our free newsletter to keep up to date


 

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During our initial discussion Panthera (Paul) fully explained the Will making process. We were made aware that our assets could be exposed to various risks such as Care Costs. Panthera (Paul) advised on how we could protect these assets by setting up Family Trusts. Having decided to go down this route Panthera (Paul) provided all the legal documentation in a timely manner despite having to work within the constraints of Covid-19 restrictions.

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