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Compulsory Trust Registration Deadline looms- It could affect you!

New HMRC rules relating to anti money laundering legislation came into force in September 2020 requiring trusts to be registered at HMRC- even if they are not taxable.  This represents a major change to the previous legal position and one which many individuals may not realise includes them.  The deadline for trust registration is 1st September 2022 so there is still time to act and avoid falling foul of the rules and landing yourself with a financial penalty.

Who does this affect?

The following types of trusts must register even if they have no tax liability:

  • all UK express trusts — unless they are specifically excluded
  • non-UK express trusts, like trusts that:
    • acquire land or property in the UK
    • have at least one trustee resident in the UK and enter a ‘business relationship’ within the UK

If the trust is not resident in the UK, you must register the trust if it becomes liable for tax on income coming from the UK or on UK assets.

If the trust has a tax liability but this is covered by a relief, you’ll need to register the trust to claim the relief through self-assessment.

Still not sure if it affects you?

There are many situations which will now require registration such as;

  • A trust set up by grandparents to benefit their grandchildren which is an express trust.
  • A bare trust which is one in which the beneficiary has the absolute right to the both the capital and income of the trust fund for example:
    • Mr X agrees with Mr Y that Mr Y will hold an asset as a nominee for Mr X. This will need to be registered because the rules apply wherever the legal owners and the beneficial owners are different people.  If the legal and beneficial owners are the same people, they do not need to be registered.
    • Some investments held for children such as stocks and shares- cash deposit accounts are excluded from registration, but stocks and shares investments held for minor children have to be registered.  You may not realise that when a parent opens an account in their name, but the funds held belong to the child a trust is created- these are excluded from registration as express trusts.
  • Trusts set up under a will.  If a deceased person gave assets in their will to a beneficiary who is only entitled to them if they reach a particular age, for example 25, that qualifies as an express trust unless the trust is brought to an end, within two years of the death.
  • Discretionary trusts are required to be registered.

Trusts that do not need to be registered unless they are liable to pay UK tax

You do not need to register the trust if any of the following apply, unless it has a liability to UK taxation:

  • the trust is used to hold money or assets of a UK registered pension scheme — like an occupational pension scheme
  • the trust is used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured
  • the trust is holding insurance policy benefits received after the death of the person assured — provided the benefits are paid out from the trust within 2 years of the death
  • it’s a charitable trust that is registered as a charity in the UK or which is not required to register as a charity
  • it’s a ‘pilot’ trust set up before 6 October 2020 and holds no more than £100 — pilot trusts set up on or after 6 October 2020 will need to register
  • it’s a co-ownership trust 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’
  • it’s a will trust created by a person’s will and comes into effect on their death providing they only hold the estate assets for up to 2 years after the person’s death
  • it’s a trust for bereaved children under 18, or adults aged 18 to 25, set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme
  • it’s a ‘financial’ or ‘commercial’ trust created in the course of professional services or business transactions for holding client money or other assets

products and arrangements with ‘Trust’ in their description, like the Child Trust Fund or Venture Capital Trusts, are not really trusts, so do not need to be registered.

When to register

Non-taxable trusts that were created on or before 6 October 2020

The deadline for registrations is on or before 1 September 2022.

Non-taxable trusts created after 6 October 2020

You must register your trust within 90 days of it being created or becoming liable for tax, or on or before 1 September 2022 (whichever is later).

Trusts that are taxable

The registration deadline depends on:

  • when the trust was created
  • the tax the trust is liable for
  • if it has been liable for Income Tax or Capital Gains Tax before

Taxable trusts that are created on or after 6 April 2021

Register your trust within 90 days of the trust becoming liable for tax or on or before 1 September 2022 (whichever is later).

How to register

Before you can register a trust as a trustee, you need to have an Organisation Government Gateway user ID and password. If you do not have one, you can create one the first time you register. You’ll need a Government Gateway user ID for each trust you want to register.

You’ll need:

  • an email address (this will be linked to the trust’s Government Gateway account)
  • your full name

OK- It is registered- what now?

 If there is taxable income you will need to do a tax return annually and ensure that the trust record is accurate and up to date- so if a trustee retires or a new trustee is appointed, you need to register the trust.

More guidance can be found on the government website https://www.gov.uk/guidance/register-a-trust-as-a-trustee or call Adcocks Solicitors today for advice on your particular circumstances contact Kerry Davies, Solicitor at kd@adcocks.com or call 01543 442101 or trainee solicitor Maddie Williams mw@adcocks.com or call 01543 442109

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