More Trusts Must Register With HMRC

Trustees may already be familiar with the need to register a trust with HMRC and to keep up to date the details of the settlor, trustees, and beneficiaries for those trusts where a UK tax liability occurs. From this Autumn more trusts will need to join the HMRC Trustee Registration Service, even where there is no tax liability. Penalties for non- compliance will arise.  Here we explain which trusts are affected and what needs to be done.

This change arises from the 5^th Money Laundering Directive, the original deadline was March 2021 but due to Covid 19 restrictions will now be Autumn 2022. The registration process will open in Autumn 2021, giving the trustees of existing trusts 12 months to register. Thereafter the deadline for registering a new trust will be 30 days from creation and the same timeframe will apply to updating the details of settlors, trustees, and beneficiaries.

Current requirements

Certain types of trust must register with HMRC when they have a liability to UK tax in respect of:

• Income Tax
• Capital Gains Tax
• IHT
• Stamp Duty Land Tax
• Stamp Duty Reserve Tax

Registration must take place within 6 months of the tax year end for new trusts (5 October) and for existing trusts 31 January following the end of the tax year when the tax liability arises. In addition, trustees must complete a SA900 tax return and complete q 20 to confirm that the trust has been registered and any changes have also been updated.

Currently a wide range of trusts are excluded from the requirement to register

Which trusts must register in future ?

• UK resident trusts, and
• Non- resident trusts which invest in a UK asset or derive income from the UK, or have a trustee which is UK resident, unless registered in an EU State, and
• Are not expressly excluded from the requirement to register.

Trusts excluded

• Most pension schemes which are regulated by The Pensions Regulator or Financial Conduct Authority.
• Charitable trusts,
• Child Trust Funds, Venture Capital Trusts, Unit Trusts,
• Statutory trusts, eg a trust arising from the law of intestacy, where there is no will and an inheritance is in trust for a beneficiary.
• Will trusts which only receive assets from the estate, provided these are distributed within 2 years of date of death,
• Trusts associated with insurance policies which only pay on death or diagnosis of terminal illness, critical illness, or disablement, providing the proceeds are distributed within 2 years, and including employer sponsored group schemes.
• Personal injury trusts and vulnerable beneficiary trusts,
• “Pilot” trusts which have assets of £100 or less, eg bypass trusts set up for estate planning,
• Maintenance trusts,
• Co-ownership trusts where the trustees and beneficiaries are the same people
• Trusts already registered in an EU country,
• Save As You Earn and employee benefits trusts,
• Trusts incidental to commercial transactions, for example, a solicitor’s client account

Trusts which will require registration

• All other trusts not specifically exempt, regardless of whether there is any tax liability,
• Absolute and discretionary trusts created with a lifetime gift,
• Will trusts which create a lifetime interest in possession trust, for example where beneficiary A gets a lifetime income with beneficiary B inheriting the capital on A’s death.
• Trusts associated with investment bonds and whole life policies which can acquire a cash in value other than on death,
• Trusts used for estate planning including, loan trusts, gift trusts and discounted gift trusts.
• Bare trusts and trusts established for minors,

Information required and penalties

The trustees will need to provide the register with the name, address, date of birth, country of birth of the settlor(s), each trustee, each beneficiary or class of potential beneficiaries and keep this up to date, within 30 days of any  change.

HMRC have not yet confirmed what penalties will apply for non-compliance. It is expected these will be like penalties for non -compliance with self-assessment deadlines, starting at £100 and rising over time.

Professional advisers will not be able to deal with trustees unless they can confirm registration of the trust.  While registration is an added burden for trustees, once completed, it should remove the need to complete anti money laundering checks on each party to the trust, using the register to confirm these details instead.

Further guidance on the need to register a particular trust can be sought from Aspira, enquires should be directed to your usual Aspira adviser, or email info@aspirafp.co.uk or call 0800 055 6585.

Kay Ingram                             
Public Policy Director                                
April 2021

Please remember, no news or research item is a recommendation or advice to buy. Aspira Corporate Solutions is not responsible for accuracy and may not share the author’s views. The contents of this blog are for information purposes only and do not constitute individual advice. All information is based on our current understanding of taxation legislation and regulations. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts. 

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