Trusts come in many different forms but are usually used to protect the interests of someone who is not getting an immediate outright benefit. However, you should consider the creation of a trust carefully to ensure its efficiency and that rules and regulations are followed correctly. In June 2017, HMRC introduced the Trust Registration Service (TRS) as part of an Anti-Money Laundering Directive. The purpose was to improve transparency around the beneficial ownership of assets held in trusts. Initially, only certain trusts liable to pay taxes such as Capital Gains Tax, Inheritance Tax and Income Tax were required to register.
However, new rules were introduced on 6 October 2020, meaning that any trust, bar some specific exclusions from the HMRC, both UK and non-UK, must now be registered with the TRS (part of the Government website), regardless of whether the trust is liable to pay any tax or not. The updated rules stated that non-taxable trusts created on or before 6 October 2020 must be registered before 1 September 2022.
Failure to register an appropriate trust by the September 2022 deadline could result in harsh financial penalties from the HMRC.
What needs to be registered?
Information can be found on the HMRC’s website, with guidance on how to check if the new registration rules affect you. You can read the guidance here. As an overview, the HMRC have stated that TRS is relevant to:
As a freeholder granting a new lease or as a property developer who wants to sell a residential home as an individual
- All UK express trusts, regardless of whether they have a UK tax liability;
- Some non-UK express trusts, such as those who have no UK trustees but own land or property within the UK and trusts with at least one UK trustee which acquires UK property or enters into a business relationship with a relevant person in the UK, for example, a financial advisor;
- Non-express trusts and excluded express trusts where they have a tax liability. These must be registered to receive their Self-Assessment (SA) Unique Taxpayer Reference (UTR) which is required to submit SA tax returns.
What happens if you create a trust after September 2022?
Following the September deadline, all new trusts must be registered within 90 days of their creation (trusts created by a Will that holds only property from the estate of the deceased person is excluded from registration as an Express Trust for a period of 2 years from the deceased’s death). Trustees will be obligated to ensure that a trust is registered within the timeframes, and HMRC will enforce penalties for any trusts that are not registered within the deadline. Additionally, there is a requirement to record any changes, such as the trust details or changes in circumstances after the trust registration, with the trust register, and these must be recorded within 90 days of the change.
Are there any exceptions to the new trust registration rules?
HMRC has confirmed that some trusts will not be affected by the new rules and, therefore, will not need to be registered. Some of those trusts include, but are not limited to:
- Charitable trusts that are UK regulated
- Pension trusts that are already registered with HMRC as a pension scheme
- Co-ownership trusts set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’.
- Rules surrounding a trust and its registration can be complex, but it is vital you follow the requirements. If you are unsure about an existing trust or if the type of trust you wish to set up will fall within these rules, our team can help. We can help confirm the type of trust you may have and your obligations concerning the regulations.
Specialist Trust Creation and Trust Registration Advice
Depending on your trust type, various deadlines and trustee obligations apply, and keeping track of your requirements can be challenging. Our experienced trusts and estate management lawyers have specialist knowledge of this area of law and can quickly advise whether you need to register an existing trust. If required, we can also register the trust for you and ensure you understand your obligations and responsibilities. If you are considering setting up a trust, we can advise you on what form of trust, if any, is suitable for your needs. Whatever your requirements, we are here to help.
We have solicitors offices in Southampton, Hedge End, Chandlers Ford, Winchester, Lymington and Richmond-Upon-Thames.
