The head of Lodders Trusts and Tax team, Elaine Morgan, is urging people to act now and ‘get their house in order’ with any Trusts they hold, ahead of new HMRC rules that take effect on the 1 September – because failure to do so means they will risk a fine.
“UK express trusts and some non-UK trusts in existence on or after 6 October 2020, must be registered with the UK Trust Registration Service (TRS) by the 1 September,” explains Elaine.
“The vast majority of people – we estimate in the region of 70% – are unaware of HMRC’s TRS, let alone the 1 of September deadline, which is now only a few weeks away.
“TRS seems to have flown under most people’s radars. It is only people with a retained legal adviser, or who are talking with tax experts or trusts and estates lawyers about their estate planning affairs in general, who are likely to hear about TRS and the deadline, which will probably be part of the discussion.”
New rules
The TRS is a register of the beneficial ownership of trusts, and was set up in 2017 as part of an EU anti-money laundering directive aimed at combatting money laundering, serious crime, and terrorist financing, and to satisfy the requirements of The Fourth and The Fifth Money Laundering Directives (4MLD and 5MLD).
“All UK express trusts liable to pay UK tax were required to register,” explains Elaine. “Each EU member state has a similar register, and the UK agreed to maintain the TRS as part of the Brexit Withdrawal Agreement. This includes situations where the legal and beneficial ownership of land and property differ, often in situations where a Deed of Gift has been made.
“New rules came into force in October 2020, requiring all UK trusts (bar a few exceptions), and some non-UK trusts, in existence on or after 6 October 2020, to register with HMRC by 1 September 2022, including trusts that have closed since that date.”
Previously, only trusts that paid certain taxes were required to register with the TRS: “The new rules have widened the TRS to all UK trusts including ones not liable to tax unless the trust is specifically excluded,” she says.
Penalties
There will be financial penalties for failure to register and not keeping the register up to date, but HMRC is still to confirm the amounts.
“It is proposed that fines are not as severe as the self-assessment penalty regime, and that ‘nudge letters’ be sent for first offences with a proposed penalty of £100 for any subsequent offences.,” says Elaine. “There will be a similar appeals process to the self-assessment regime. HMRC will enforce more stringent penalties if trustees deliberately ignore the registration requirements.”
More information
The full list of trusts not required to register can be found on the government website here, but those excluded from the requirement to register, include: pension schemes, charitable trusts, will trusts wound up within two years of death, policy trusts paying out on death or critical illness, and existing trusts with a value of less than £100 created prior to 6 October 2020.
Elaine has extensive specialist knowledge in Trust management and advice, particularly working with high-net-worth clients, and specialises in administering the trusts set up from landed estates and family trusts, undertaking pre-death and administration tax on estates matters, and advising on capital gains and IHT implications and associated tax liabilities.For help with the Trusts Registration Service, contact Elaine Morgan, Lodders, t: 01789 206943, e: elaine.morgan@lodders.co.uk
Update, Tuesday 2 August 22: due to extremely high levels of demand, please note that we are no longer able to accept new enquiries for trust registrations after Friday 5 August. If you have already instructed Lodders on your trust registration matter, please be assured that it is in hand.
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