Registering Trusts: How The Latest New Rules Will Affect You27th Apr 2021
Trust Registration Deadline Extended Again
Are you a trustee? The government has extended the deadline for registering trusts under the EU’s Fifth Anti-Money Laundering Directive (aka 5MLD). But this is no reason to delay.
And yes, you do still have to register – even though the UK is no longer in the EU: the UK has adopted EU anti-money laundering directives into this country’s laws. Your obligations as a trustee will increase under 5MLD so it pays to grasp the nettle and take prompt action.
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Old Rules Under The Fourth Anti-Money Laundering Directive (4MLD)
Four years ago 4MLD brought in new record-keeping obligations for trustees. HM Revenue & Customs required trustees to register details of their trust if it owed any Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax and Stamp Duty Reserve Tax.
Some estates must also be registered if the personal representatives need to complete a Self Assessment Trust and Estate Tax return.
What Is The Trust Registration Service (TRS)?
The online Trusts Registration Service (TRS) was set up to replace the old paper-based system – the old form 41G (Trust).
The TRS was intended to help trustees comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (UK SI 2017/No. 692). Trusts that had to register with HM Revenue & Customs would register online via the TRS.
How The Registration Rules Changed In October 2020
On October 6 2020, new rules extended the register to cover more UK and some non-UK trusts. The plan was that trusts should be registered before March 10 2022. Any trusts created after February 9 2022 would have to register with the TRS within 30 days of coming into existence.
Despite this increased scope of the rules, not every trust has to be registered. Trusts which are set up for limited purposes do not have to be registered (unless they are liable to pay tax).
You do not have to register a trust created by a person’s will and which comes into effect on their death…provided that the trust only holds the estate assets for up to two years after the person’s death.
Among other trusts excluded are:
- trusts used in UK-registered pension schemes and life insurance policies
- charitable trusts (find out more here about setting up a new charity)
- ‘pilot’ trusts that hold not more than £100
- co-ownership trusts set up to hold shares of property or other assets jointly owned by two or more people for themselves as ‘tenants in common’
- trusts for bereaved children under 18 or adults aged 18-25 set up under the will (or intestacy) of a deceased parent (or the Criminal Injuries Compensation scheme)
- financial or commercial trusts created to hold client money or other assets during business transactions/professional services.
What Is The Current Position On Registering A Trust?
The change from the old paper system to the TRS has taken longer than expected for two main reasons:
- Huge numbers of trusts need to register.
- HMRC has had to redesign the existing TRS to cope with the expansion. It had been hoped this redesign would be ready by March 2021 but now that is looking more like this summer.
All this delay has caused concern among some trustees and agents. They are worried they may not be able to register before the March 10 2022 deadline.
So HMRC has now said the deadline is likely to be 12 months after the date of actual delivery of the expanded register – ensuring that trustees and agents will have the time they need to comply.
Penalties For Failing To Register Your Trust
Fail to register your trust in time and you face a scale of penalties:
- up to three months after the due date – £100 penalty
- three to six months after the due date – £200 penalty
- more than six months late – either 5% of the total tax liability or a £300 penalty, whichever is the higher sum.
You must ensure you are keeping the register updated. You must make a declaration even if nothing has changed.
Remembering to carry all this out can be onerous if you’re a trustee who does not do this for a living. It’s beneficial to get help from a lawyer who specialises in trusts. We can also help you to review and update your trust.
Further Reading
- Why You Should Beware Of So-Called Asset Protection Trusts – read more…
- Will Your Lifetime Trust Backfire And Cost You Thousands Of Pounds? – read more…
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Do you need to create a trust? Worried about an existing trust? Do you need to register it? When was the last time you reviewed your trust? Concerned about trust compliance issues? Contact our Wills and Probate Team.
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This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.
