With the deadline for registration now just six months away, we look at the steps trustees need to take to ensure they remain compliant with the regulations.
Trustees have to perform a number of duties to fulfil their role effectively; however, some may not be aware of the Trust Registration Service (TPR) and the additional requirement for trustees to comply with the new registration process.
Set up in 2017, the HMRC Trust Register was introduced to improve transparency of the beneficial owners of trust assets. Under new Anti-Money Laundering Directives adopted at the time, trustees will need to provide details of the trust, as well as information relating to the settlor (the individual or individuals creating the trust), trustees, and potential beneficiaries of the trust assets. For each interested party to the trust, the service will ask for the name, date of birth, national insurance number, and address to be registered, and if the trust is being registered for the first time, details of the assets held in the trust will need to be provided. You should be able to find these details in the trust deed.
As it stands currently, only those trusts who have UK tax to pay need to register using the Trust Registration Service. These are known as Taxable Trusts, and these include trusts that are liable to income tax, capital gains tax, inheritance tax or stamp duty land tax.
The introduction of the Trust Registration Service casts a wider net, with many trusts that do not incur a charge to UK tax now faced with having to register for the first time. October 2020 saw the expansion of the Anti-Money Laundering Directives and as a result, so-called “Express” Trusts – even if there is no tax to pay – are now caught under the Trust Registration regime.
The term “Express” Trusts does not relate to their speed, but instead relates to those created intentionally by a Deed, by an express, or inferred declaration of trust. These are trusts that do not have an immediate liability to any UK tax, such as those used in estate planning.
One common type of Express Trust that will be caught by the expanded Registration Service are Bare Trusts. These are perhaps the most common form of trust, which are often found written into wills, when assets are left in a simple form of trust for a beneficiary who is below the age of 18. Assets in this type of trust are held by the trustees until the beneficiary reaches the age at which they automatically become entitled to the assets held in the trust. There is usually no tax liability to report on Bare Trusts as the UK tax liability is incurred by the beneficiary and not the trustee, and in the past trustees have not had to be involved in reporting to HMRC.
This all changes with the introduction of new rules, and Bare Trusts are caught within the remit of the Trust Registration Service. Bare Trusts created by way of deed, such as a gift from a grandparent during their lifetime into a trust for the benefit of grandchildren, will need to be registered on the service by the deadline, whereas those created by a will need to be registered if the trust is still in existence two years after death of the settlor.
For these Express Trusts, the deadline for registration has been pushed back a number of times since the measures were first announced. The deadline has now been confirmed as 1st September 2022, and all Express Trusts in existence on 6th October 2020, or created after this date, will need to have registered by this date. Trusts created after 3rd June 2022 will have 90 days to register on the service.
A small number of Express Trusts can avoid the registration process, with these being limited to Charitable Trusts, UK registered pension schemes, and trusts where a disabled person is a beneficiary.
Following the first registration, the trustees will need to ensure that the Register is updated each tax year, and in addition trustees need to be aware of the need to inform HMRC each time there are changes to the beneficial ownership of a trust, for example whenever a trustee retires from their position or is appointed, or when beneficiaries change.
Trustees need to be aware of the requirements of the Trust Registration Service and if the trust needs to be registered, ensure that they comply with the registration process by the deadline. HMRC have provided an online registration service, or trustees may wish to ask their accountant to register the trust if they act as agent for the trustees. For more information on registering a trust visit Register a trust as a trustee – GOV.UK (www.gov.uk)
We have long provided independent investment advice to trustees and guided them in respect of their duties. Whilst the responsibility rests with the trustees to register the trust correctly, we are on hand to give guidance to trustees if required.
If you are interested in discussing the above with one of our experienced financial planners, please get in touch here.
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
