Insights

A new requirement to register trusts online with HMRC came into operation on 1 September 2022. This is part of an EU directive and, although HMRC have confirmed they won’t be charging penalties for late registrations, it is still important to comply with these rules as soon as possible.

Many different types of non-taxable trusts will need to register online and trustees have been reporting numerous difficulties with the system. This article explains the new rules and what your obligations are if you are the trustee of a trust.

HMRC’s new online Trust Registration Service began on 1 September 2022. It requires all non-taxable trusts in existence on or after 6th October 2020 to be formally registered online. There are a few exceptions, but the majority of trusts, even if they have no taxable income or gains, need to comply.

According to the Gov.uk website, a £5,000 penalty may be payable for non compliance. Penalty charges for late registration have been waived so far, but this relaxed attitude is unlikely to continue into the long term.

What information is required for trust registration?

When a trust is registered, the trustees are asked to nominate an agent or lead trustee to submit specific details. These will include the following:

• Trust assets and the addresses of any UK properties if relevant;
• Estimated market valuation of the assets held on the date when the trust was created (i.e. when the assets were settled into the trust);
• Identity of the original settlor(s), trustees, and any person(s) who have control over the trust;
• Identities/names of all beneficiaries - includes actual and potential beneficiaries.

In what circumstances does a trust need to be registered?

If you are the trustee of a trust to which any of the following conditions apply, it will be necessary to register the trust online:

• Anyone who creates a trust or who becomes a trustee of an unregistered trust on or after 1 September 2022;
• Trustees of a trust that existed on 6 October 2020 and remains in place – this is irrespective of how long ago it was originally set up;
• Trustees of a trust that existed on 6 October 2020 but has since been wound up;
• Trusts set up after 6 October 2020 - irrespective of whether they are in place now or have been wound up;

Trustees of trusts wound up before 6 October 2020 and no longer in existence on this date do not need to register.

Which types of trust need to register?

All express trusts (i.e. trusts created in express terms) including those already in existence need to be registered with HMRC, even if there are no tax liabilities. The following types of commonly used trusts requiring registration include:

• Discretionary trusts;
• Bare trusts;
• Trusts created by a will where the trust is still in existence two years after the date of death (such as Life Interest Trusts);
• Some non-UK resident trusts;
• Trusts where there is an immediate post-death interest (IPDI trusts).

Are any trusts exempt from registration?

The following types of trust do not need to be registered online with HMRC:

• Will trusts where the trust only receives assets from the estate and is wound up within two years of the date of death;
• Statutory trusts (such as a trust as a result of intestacy or bankruptcy);
• Co-ownership trusts where the beneficiaries and trustees are the same persons (unless the beneficial owners are not the legal owners);
• Pilot trusts where the trust holds less than £100 and was set up prior to 6 October 2020 (a pilot trust set up after this date will still have a registration obligation);
• Trusts created to set up a bank account for a minor or vulnerable person;
• A trust for a disabled person;
• A trust for bereaved minors;
• A personal injury trust;
• An 18-25 trust;
• Trusts that pertain only to an insurance policy where payment is not made until death or terminal illness;
• Charitable trusts.

What action needs to be taken for new trusts?

Trusts set up on or after 1 September 2022 and which don’t fall within the recognised exemptions need to be registered within the first 90 days of set-up.

Going forward once the trust is registered, trustees will also be required to update HMRC about any changes affecting the trust in the future.

This should always be done within 90 days of the relevant change occurring.

Failure to keep the information held about a trust up to date will incur a penalty charge.

Other HMRC registration requirements - for taxable trusts

There are additional rules to follow for taxable trusts and these are as follows:

Taxable trusts created on or after 6 April 2021 – registration needs to take place within 90 days of the trust becoming liable for tax or on or before 1 September 2022 (whichever is later).

Taxable trusts created before 6 April 2021 that are liable for Income Tax or Capital Gains Tax for the first time should be registered on or before 5 October in the tax year after the one in which the trust starts to receive any income or has capital gains and becomes liable for Income Tax or Capital Gains Tax.

Trusts that have already been liable for Income Tax or Capital Gains Tax

The trust should be registered on or before 31 January in the tax year after the one in which the trust received any income or has capital gains that are liable to tax.

Trusts that are liable to other taxes

The trust should be registered or before 31 January in the tax year after the one in which the trust has any other tax liability, for example Inheritance Tax.

If the trust is liable to more than one tax and both deadlines apply, registration should be before the earlier of the 2 deadlines.

Clearly the administration of a trust can be highly complex. If you have a trust and would like some help with the registration process, please contact us via partners@rjp.co.uk.