From 1 September 2022 almost all trusts now have to be registered with HMRC or you face a penalty – this includes trusts that were in existence on 6 October 2020 even if they no longer exist!
You may not realise it but we are surrounded by trusts as they are not always obvious. If you own property or a bank account with someone it is held on trust; or you hold an investment for a child it is a trust.
Bare trusts where the trustees hold assets for someone else e.g. nominee shareholdings are likely to need registering. A joint account where all the funds are held for one of the owners would be a bare trust. Executors hold an estate on trust (see below). If they want to save Capital Gains Tax and appoint part of a property to a beneficiary before selling it as bare trustee for the beneficiaries that trust would need to be registered – in addition to the estate if it had been running for more than 2 years.
Currently, only taxable trusts whether visible or not need to be registered with HMRC, but from 1 September 2022 unless specifically excluded, all trusts set up deliberately (i.e. not created by the courts or operation of law) will need to be registered with HMRC as part of anti-money laundering legislation.
Trusts needing to be registered include:
- All express trusts (unless specifically excluded) e.g. where a will trust has left a life interest in a house to a cohabitant or a discretionary trust;
- Property where the legal ownership does not reflect the beneficially ownershipg. you own it with an additional person not on the title.
- Pilot trusts set up since 6 October 2020 or set up before then with more than £100 (these are sleeper trusts sitting in the back of a filing cabinet with only a nominal sum in them). E.g. you might have set up a pilot trust for your estate to pay into when you die.
- Trusts created in a will which go on 2 years beyond the date of death.
If a trust meets the registration requirements as at 6 October 2020, it still needs to be registered even if it has been wound up by 1 September 2022 and then deregistered. E.g. if an estate took more than 2 years to administer but was wound up in April 2021 it will still need to be registered.
Certain non-UK express trusts also need to be registered (unless specifically excluded)
- if at least one of the trustees is resident in the UK and the trustees enter a business relationship in the capacity of a trustee with a UK relevant person including a lawyer, accountant, art market participator, letting agent or financial institutions.
- The trustees in the capacity of a trustee acquire UK land.
Trusts which do not need to register
Some types of trust do not need to be registered unless they are liable to pay UK tax. Examples of these trusts include:
- Some financial products and arrangements with ‘Trust’ in their description, like the Child Trust Fund (a children’s bank account) or Venture Capital Trusts, are not really trusts, so do not need to be registered.
- Charitable trusts;
- Trusts for bereaved minors or young adults aged 18-25 following their parent’s death;
- Will trusts (but only for the first two years after death) – after that they need to be registered;
- Trusts imposed by courts e.g. compensation payments or created by legislation;
- Trusts where the legal title matches the equitable e.g. a house owned by a husband and wife for themselves.
An existing trust which does not have a UK tax liability must be registered before September 2022.
After September 2022 a new trust must be registered within 90 days of creation or within two years of death if a will trust.
Who is responsible for registering the trust
The trustees are responsible but Branch Austin McCormick can assist and do this for you.
How do you register a trust
Trustees or their agents register a trust using the UK ‘Government Gateway’ facility after setting up a Government Gateway account online. This is yet another layer of compliance for trustees to consider alongside their many other responsibilities.
Our team can assist with compliance and administration of the trust and explain the trustees’ responsibilities.
What happens after registration
Trustees must notify HMRC if the trust register details change within 90 days of the change during years where the trust is taxable.
Please note this is a generalized and truncated explanation of trust registration. This email is designed to bring the matter to your attention. It should not be taken as legal advice as everyone’s circumstances are different. Please contact Miriam for a free review to see if you need to register your trust firstname.lastname@example.org 020 7851 0100.