Trusts are a useful tool for a variety of reasons including protecting wealth for future generations. However, it is not always clear who is in control of the Trust Fund and what the purpose of it is. This is a particular problem for the Government especially when trying to make sure that Trusts pay the proper amount of tax owed and ensuring that criminals are not using them as a vehicle to hide money.
The UK Government has set up the Trust Registration Service (TRS) (other jurisdictions have setup similar registers). The new rules came into force in October 2020. Prior to that date, only trusts that had a tax liability were required to register with H M Revenue & Customs.
However, all express trusts (with a few exceptions) that were in existence on the 6th October 2020 must now be registered. New Trusts since the 6th October 2020 must also be registered.
The deadline for Trust registration is the 1st September 2022 or 90 days of the Trust being created (whichever is later).
It is the Trustees responsibility to register the Trust with TRS. It is a matter for the Trustees to choose a “lead trustee” to do this. Further details can be found at the Government website.
Express Trusts have been created deliberately by a person in the form of a written document. These can take effect during the person’s lifetime or by Will to take effect on death.
H M Revenue & Customs have set out examples of Trusts that would need to be registered and others that would be excluded. A simple example would be two people that own a property as “Tenants in Common”. They are holding the property “on trust” for themselves. If the two people are the only beneficiaries of the “trust”, then it would not need to be registered.
This is different to a property that is held by two people, but they hold the property for themselves and a third person. The Trust in this example would have to be registered.
When a person dies, their estate may not need to be registered on the TRS (although if the estate is “complex” then it may need to register to pay its own tax for income received during the administration). However, if an Estate continues to run for more than two years from the date of death of the deceased then it will need to be registered with the TRS.
Even if a Trust has been closed down before the 1st September 2022, it must still be registered with TRS if it was in existence on the 6th October 2020.
Once the Trust has been registered, there is an ongoing obligation to make sure that the records held with the TRS are kept up to date.
Advice should be taken as to whether a Trust should be registered. If a Trust should be registered but is not registered by the deadline then H M Revenue & Customs have powers to impose Penalties. When dealing with the Trust, the Trustees will be asked to provide confirmation that the Trust has been registered.
For further information please contact our private client team here.
The above is meant to be only advice and is correct as of the time of posting. This article was written by Kristian Croad, Senior Associate in the Private Client team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of May 2022