Registering a Trust

Bexleyheath, Petts Wood & Blackheath

HMRC regulations relating to the registration of trusts have now changed. It is now necessary to register most types of trusts with HMRC, including trusts which do not produce an income. Failure to register a trust in time may result in penalties. Aletta Shaw can assist with the registration of your trust for you.

What is a trust?

A trust is a separate legal entity and can be used to manage assets which can include investment, money, land/or property. Trusts can be used to protect family assets or pass assets to your beneficiaries in a Will.

There are a variety of trusts, and these are taxed differently. A trust is usually set out in a document which refers to the settlor, trustees, and beneficiaries of the trust deed.

The settlor creates the trust and decides how the trust should be used. A settlor can also be a beneficiary.

Trustees are responsible for managing the trust and paying the tax (if any) due.

Beneficiaries can benefit from the trust by receiving income (for example rental income from a property held in a trust) or capital (for example a cash gift for a minor to be held on trust until they attain a certain age).

What are the rules?

On 6 October 2020, the Fifth Money Laundering Directive (5MLD) came into effect in the UK.

The impact of the new legislation has further extended the rules on reporting information to HMRC. Therefore, any trusts that were created from 6 October 2020 will now need to be registered. Trustees are now required to register their trust under HMRC’s online portal, the Trust Registration Service (TRS).

Previously, trustees were usually only required to register their trust under the TRS if the trust was liable to pay any UK tax. The following are examples of tax whereby a trust can be liable:

• Inheritance Tax
• Income Tax
• Capital Gains Tax (CGT)
• Stamp Duty Land Tax (SDLT)

Trusts that now need to be registered

These are generally all UK express trusts (unless exempt), for example:

• Declaration of Trust
• Life Interest Trust
• Discretionary Trust

However, if the trust requires a Unique Taxpayer Reference (UTR) for Self-Assessment purposes, then the trustees will still need to register the trust.

There are certain trusts that do not need to be registered (unless the trust is liable to pay UK tax). These types of trusts include some of the following:

• Trusts that are set up to hold money from UK registered pension scheme (for example Occupational pension scheme).
• Certain charitable trusts.
• Pilot trusts created prior to 6 October 2020 and hold no more than £100 (however, if created after 6 October 2020 this may need to be registered).
• Trusts that are used to hold retirement or life policies (providing the policy only pays out upon death, critical or terminal illness or permanent disablement, or to meet the healthcare costs of the person assured).
• Trusts for bereaved minor or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent.
• Certain co-ownership trusts that are set up to record the beneficial interest held in property or other assets (unless both the trustees and legal owners are different).

The deadline for registration

• All non-taxable trusts that come into existence on or before 6 October 2020 must now be registered (unless exempt) on or before 1 September 2022.
• All non-taxable trusts that were created after 6 October 2020 must be registered within 90 days of being registrable or on or before 1 September 2022 (whichever is later).
• Any non-taxable trusts created after 2 September 2022 must be registered with 90 days from the date the trust was created.
• Under the 5MLD, trustees will be responsible for ensuring that the information provided on the online portal remains updated and must advise HMRC of any changes.
• Failure to comply with the new anti-money laundering regulations may result in sanctions and or financial penalties issued by HMRC.

How to register

All trustees named in the trust are equally responsible, but you can nominate “one” lead trustee to be main point of contact for HMRC.

Before you can access HMRC’s online portal you will need to apply for a Government ID which will enable you to use the Government gateway account.

The trustees will need to provide HMRC with some basic information regarding the settlors and beneficiaries named in the trust, as well as details of the assets held.

Aletta Shaw can advise on whether a trust is registerable under the 5MLD and charge a fixed fee to register the trust on your behalf. To receive advice on this contact our Private Client Team on 020 8301 4884 or book a consultation.