The Deadline For Registering Trusts Is Approaching Fast.
As you may (or may not) be aware, trusts with a tax liability were required to register with HM Revenue & Customs and provide them with information about their beneficial ownership using the Trust Registration Service (TRS). Interestingly, HMRC have confirmed that only 153,241 trusts had been registered with the Trust Registration Service since it was launched in June 2017. However, under the new legislation, even trusts which do not have a tax liability must register by September 2022, and it is estimated that up to 1 million trusts may need to register by then or face potential penalties.
Under the terms of the 5th Money Laundering Directive, the obligation to register trusts has been extended to trustees of the following types of trusts:
- All UK resident express trusts (meaning any trust deliberately settled as opposed being created by a court order or statute) including non-taxable trusts
- Non-EU resident express trusts that acquire UK land and property either on or after 6th October 2020
- Non-EU resident express trusts with at least one UK trustee that enter into a new business relationship with a UK relevant person (such as an accountant or a financial institution) on or after 6th October 2020
This means that the following trusts will have to register and provide information to HMRC:
- Bare trusts, where the beneficial and legal owner are not the same (for example where a parent holds a property on trust for the benefit of the child, or where one spouse holds a property for the benefit of themselves and their spouse)
- Life policy trusts, where a policy can be surrendered at any time
- Nominee arrangements
Trusts which were in existence on or after 6th October 2020 and have since ceased will also have to register with the TRS, and then their records will immediately close.
The trusts that will remain exempt are as follows:
- Trusts imposed by statute. For example, the statutory trust arising on intestacy
- UK registered pension trusts
- Charitable trusts regulated in the UK
- Pure protection life insurance policies (including those paying out critical illness)
- Trusts used by government and UK public authorities
- Trusts for vulnerable beneficiaries or bereaved minors (only if the trust does not have a tax liability)
- Personal injury trusts
- Save-as-you-earn schemes and share incentive plans
- Maintenance fund trusts
- Authorised unit trusts
- Pilot trusts which hold no more than £100 and which were set up prior to 6th October 2020
- Will trusts created on death, providing they only hold the estate assets for up to 2 years and have no tax liability
The following information is required to be reported as part of the registration:
- Settlor: full name, date of birth, country of residence, nationality, National Insurance number, domicile
- Trustees: full name, date of birth, country of residence, nationality, National Insurance number
- Beneficiaries: full name, date of birth, country of residence, nationality, National Insurance number; mental capacity
- Assets passed to the trust: namely UK property
- For legal entities: corporate name, registered office, nature of entity’s role in relation to the trust
The deadlines for registrations are the 1st September 2022 for express trusts in existence before 6th October 2020 and for trusts set up after 5th April 2021, but not liable to tax until 4th June 2022. New trusts are required to register within 90 days of being set up.
HMRC have indicated that there will be penalties for non-compliance. The initial penalty will the £100. If the registration is more than 3 months late, there will be another penalty of £300, and another £300 if the registration is more than 6 months late. They also indicated that more severe penalties would be imposed to deliberate failure to register. However, there is no definite limit to the amount of those penalties at present.
If you would like to discuss any element of this article in more detail, or find out how you can register your trust, you can get in contact with me by sending an email to email@example.com or alternatively you can contact the Tax Partner directly at firstname.lastname@example.org and we would be glad to help!