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Important update to the Trust Registration Service

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Introduced as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), HM Revenue & Customs (HMRC) has extended the requirement for trust registration to non-taxable UK trusts and some non-UK trusts (unless the trust is specifically excluded due to its characteristics). The objective is to give greater transparency to the ownership of trust assets and will affect you if you’re a trustee, or you administer or benefit from a trust.

HM Revenue & Customs (HMRC) has extended the requirement for trust registration.
HM Revenue & Customs (HMRC) has extended the requirement for trust registration.

Which trusts should be registered?

  • all UK express trusts, whenever established, provided in existence on or after October 6, 2020
  • non-UK express trusts that acquire an interest in land in the UK on or after October 6, 2020
  • non-UK express trusts that have at least one trustee resident in the UK and which enter into a business relationship on or after October 6, 2020 with a relevant person in the UK.
  • HMRC has stated that an express trust is one that has been deliberately created by a settlor using a written document such as a deed or declaration of trust and trusts set up in wills which have come into being following the death of the testator.

Key examples:

  • Trusts for jointly held property where the beneficial title differs from the legal title eg the owners are holding the property for the benefit of others who are not on the legal title
  • Complex estates – those with substantial CGT or income tax liabilities
  • Nil rate band trusts holding property interest or debt
  • Will trusts exceeding two years post death
  • Lifetime trusts – if holding £100+ or set up after October 6, 2020
  • Some simple trusts – where cash is held for the benefit of another.

Which trusts are exempt?

  • Trusts imposed by statute such as on intestacy or bankruptcy
  • Trusts created by court orders such as on divorce or following a dispute
  • Co-ownership trusts where the legal and beneficial owners are the same people ie where a couple jointly own their home or have a joint bank account.
  • Trusts set up before October 6, 2020 holding assets valued at less than £100
  • Will trusts which are wound up within two years of death
  • Trusts for bereaved minors
  • Trusts where beneficiary is disabled
  • Trusts of life policies paying out on death, terminal illness or disability
  • UK charitable trusts
  • Maintenance Fund Trusts (trusts approved by HMRC for the maintenance of specific historic buildings or land)
  • Trusts created to set up a bank account for minors or vulnerable people
  • Trusts holding insurance policy benefits
  • Trusts holding healthcare, life or retirement policies
  • ‘Financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets.

When should the trusts be registered?

  • Non-taxable trusts in existence on October 6, 2020 must register by September 1, 2022
  • Non-taxable trusts created after October 6, 2020 must register within 90 days or by the September 1, 2022, whichever is the later
  • Relevant taxable trusts must register by January 31 (or in some cases October 5) following the end of the tax year in which the trust acquires a liability to relevant UK tax
  • Changes to Trust Registration Service records on trusts and/or beneficial owners must be notified within 90 days of the date of the change.
  • A trust which was in existence on October 6, 2020, or created since then, and now closed still needs to register by September 1, 2022. It should be removed from the register after it has been registered.

The liability rests with the trustees and failure to register could result in a penalty.

If you would like further information or assistance in the registration of trust, contact our private client team on 0344 9672505.

Visit woodfines.co.uk.

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