The UK has an obligation under the EU’s Fourth & Fifth Money Laundering Directives to maintain a central register of the beneficial ownership of tax paying trusts regardless of whether the trust is income producing or not.
Trustees have always been responsible for the registration, calculation, reporting and payment of any taxation due via Trustee Self-Assessment however registration with HMRC has only been required when tax is due to be paid.
Where tax is due to be paid the trustees must register by 5th October in the tax year following the tax year where the trust first receives any income or capital gains or is liable for IHT. This is not changing.
Going forwards most trusts will now need to register regardless of whether they have tax liabilities or not and tax-paying trusts that are already registered will need to provide additional information about the “beneficial owners”.
The following types of trust are exempt from compulsory registration:
• Will trusts for a period of two years unless assets from outside of the deceased estate are added then they must register at that point.
• Insurance policies for life assurance, critical illness, disablement, healthcare services written in trust while the settlor is still alive. This applies whether the plan does or can obtain a value or not, but it does not extend to investment bonds where the primary aim is investment rather than protection.
• Trusts holding the proceeds from life assurance policies for a period of two years to allow time for distribution.
• Registered pension schemes.
• Lifetime pilot trusts holding less than £100 and in existence before 6 Oct 20. If they added to after that date and breach the 100 limit, then they must register at that point.
• Trusts for joint ownership of property or assets for themselves under ‘tenants in common’.
• Trusts set up under intestacy rules to hold assets.
• Trusts for bereaved children under 18, and 18-25 trusts where a parent has died.
• Charitable trusts.
• Personal injury trusts set up under a court order to receive compensation
• Trusts opening a bank account for a child
Registration and timings:
• Any trust that existed on or before 6 October 2020 must be registered by 1 September 2022.
• Any Trust that is set up after 6 October 2020, must be registered within 90 days or by 1st September 2022, whichever is the later date.
• From 1st September 2022 onwards, all new Trusts will be required to be within 90 days.
Trusts will need be to registered with the HMRC Trust Registration Service (TRS) via the Government Gateway system by the Trustees or someone acting as an Agent.
What happens if I don’t register in time?
Failure to register the trust or update details within the applicable deadlines could result in HMRC levying fines against the trustees of:
(i) a £100 penalty for registration or updates made within 3 months of the due date;
(ii) a £200 penalty for registration or updates made between 3 months and 6 months of the due date; and
(iii) a £300 penalty if more than 6 months late.
It is likely that any fines or penalties will be levied against the lead trustee, in the first instance.
How will this impact trustees?
Trustees will need to ensure that any trust they look after will need to be registered with TRS in line with the above dates.
Continue to calculate, pay, keep records, and report any tax due and provide beneficiaries with a statement of tax paid. This has not changed but what is not yet clear is whether Trustees will have to declare Nil Returns each year where tax is not due to be paid but we expect that might be the case.
Detailed instructions for Trustees to register are contained within the following link and it is not a difficult process albeit quite time consuming:
The Financial Conduct Authority does not regulate taxation advice or trusts.
The content in this article was correct on 01/08/2022.
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