HMRC set out deadlines to ensure that all Trusts (with some specific exclusions) must be registered with the Trust Registration Service (TRS) by 1 September 2022, whether they are chargeable to tax or not.
To meet the requirements of the EU’s Fifth Money Laundering Directive, from 6 October 2020 all UK express trusts (taxable or not) and non-UK express trusts (generally those that own UK property/land), have to be registered, unless specifically excluded (outlined further below).
WHEN TO REGISTER
Non-taxable trusts
The deadline for non-taxable trusts created on or before 6 October 2020 to register with the TRS is 1 September 2022, with a few exclusions (see further below).
Any non-taxable trusts set up on or after 6 October 2020 will need to register the trust within 90 days of it being created or becoming liable for tax, or on or before 1 September 2022 (whichever is later).
Taxable trusts set up on or after 6 April 2021
These Trusts must register within 90 days of creation or by 1 September 2022, whichever is later.
Taxable trusts set up prior to 6 April 2021
Trusts that become liable for Income tax (IT) or Capital Gains Tax (CGT) for the first time, must be registered by 5 October after the tax year in which the trustees first become liable for taxes.
Other trusts liable to other UK taxes such as Inheritance Tax (excluding CGT & IT), which are already liable for UK taxes must be registered by 31 January after the tax year in which the trustees have a tax liability.
WHICH TRUSTS DON’T HAVE TO REGISTER
The following trusts will be excluded from registration:
- Trusts imposed by statute, where these do not result from the clear intention of the settlor. For example, the statutory trust arising on intestacy
- UK registered pension trusts
- Charitable trusts regulated in the UK (or not required to register with the Charity Commission under the Charities Act 2011)
- Pure protection life insurance policies and those paying out on critical illness or disablement, including group policies
- Trusts used by government and other UK public authorities
- Trusts for vulnerable beneficiaries or bereaved minors
- Personal injury trusts
- Save as you earn schemes and share incentive plans
- Maintenance fund trusts
- Certain trusts incidental to commercial transactions
- Certain trusts used as part of financial markets infrastructure
- Authorised unit trusts
- Co-ownership trusts, where the trustees and beneficiaries are the same persons (e.g. for jointly holding properties)
- Will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy and are wound up within 2 years of death
- Existing trusts holding assets valued at less than £100 unless or until further assets are added (pilot trusts).
DETAILS REQUIRED TO REGISTER A TRUST
We have provided a checklist from Honey Barrett in relation to the Trust Registration Service, which is designed to assist Trustees with the registration process.
We also provide a link to the HMRC pages, that provide a more comprehensive guidance on the information and process involved - https://www.gov.uk/guidance/register-a-trust-as-a-trustee
HMRC PENALTIES
HMRC have confirmed that they do not plan to charge penalties automatically but will instead assess each case.
A failure to register a trust or a failure to notify any change of information by the due date, can result in the following penalties chargeable on the lead trustee:
- registration made up to three months from the due date – £100 penalty;
- registration made three to six months after the due date – £200 penalty; and
- registration more than six months late – either 5% of the tax liability or £300 penalty, whichever is the greater sum.
A penalty will not be payable if HMRC are satisfied that a trustee took reasonable steps to comply with the regulations.
WHAT ABOUT PARTNERSHIPS?
It may seem odd, however partnerships, especially those involved with farming, could be caught by the new regulations to register as a Trust.
General partnerships cannot hold property and therefore the land or assets are normally held by the partners in trust for the partnership, although limited liability partnerships (LLPs) can hold land.
It is possible that within the partnership, the legal title of the land is held by one or two partners but the beneficial interest covers say 3 or 4 partners. This would considered a co-ownership trust.
You can therefore see the need to register such arrangements, although there are a few exclusions, such as land that is held for the benefit of themselves and no-one else.
Specifically in the case of farming, where different parcels of land have been acquired at different times, it is possible that a Trust will need to be created in each case.
More information can be found at https://www.gov.uk/guidance/register-a-trust-as-a-trustee#when-to-register
Please click here for further guidance notes and a checklist to complete, which is designed to assist Trustees with the registration process.