Rules in relation to the registration of trusts via the Trust Registration Service (TRS) with HMRC have now changed.
What is the change to the registration of trusts
Previously only those trusts with a tax liability, whether inheritance tax, income tax or capital gains tax needed to be registered with HMRC.
Now, many trusts that are not taxable, will need to be registered with HMRC.
What does this mean?
It is the responsibility of the trustees to register when and how the trust was created, the trustees’ details and the beneficiaries’ details.
The starting point is that all trusts need to be registered unless they are exempt.
- Trusts created by a Will.
- Trusts of land between individuals about who legally owns a property on behalf of others who are entitled to the proceeds.
There are still a few common scenarios where trusts do not need to be registered.
- Will trusts created on death that only receive assets from the estate and come to an end within two years of death.
- Trusts which are for the co-ownership of assets where the legal owners and beneficiaries are the same.
Other exempt trusts include:
- Trusts that were created to hold assets in the future and are currently holding less than £100. These are commonly called “pilot trusts”. This is only for trusts which are set up before 6 October 2020. Trusts set up after this date for this purpose will need to be registered.
- Trusts for bank accounts for individuals under 18 or those who are vulnerable. Child trust funds and junior ISAs do not need to be registered.
- Certain specific trusts, examples of which include for someone who is disabled, for a child who is under 18 and the trust has been created by their parent’s death, a special trust known as an “18 to 25 trust”, personal injury trusts, and other specific trusts.
- Trusts which have been created to hold an insurance policy only, and so long as the policy only pays out on death, terminal or critical illness or when a person becomes permanently disabled, or to meet healthcare costs. They remain excluded until the policy is actually surrendered and may still be if the proceeds are paid out within two years of death.
- Trusts created by Court Order.
- Trusts which hold assets of a UK Registered pension scheme.
- Trusts that are registered in another EU member state.
- Charitable trusts registered in the UK or exempt from registration as a charity.
- A “financial” or “commercial” trust to hold client money/ assets by professional services or business transactions.
What should the trustees do?
If you are a trustee of any form of trust you need to decide whether your trust needs to be registered or not.
This can be done using HMRC guidance or seeking advice from your solicitor or accountant.
Trustees will usually register their trust directly with HMRC. Alternatively, we can help you through this process.
When must this be done?
Registration must take place by 1st September 2022.
The failure to register may result in a financial penalty.
If in any doubt, please contact HMRC or contact us using the form below.