With the 1 September deadline looming, trustees of trusts which were not previously required to register with HM Revenue & Customs should be gearing up to comply with the new registration requirements. The new rules have arisen as a result of anti-money laundering regulations.
Until now, most trusts that had no UK tax liability were not required to register, but this is changing.
Which types of trusts are required to register?
All UK express trusts must register by 1 September 2022, even if they have no tax liability, unless they come within one of the excluded categories. An express trust means one which was created intentionally by a settlor during their lifetime, or in a Will.
Examples of non-express trusts are those imposed by law such as the intestacy rules (when a person dies without making a Will); ‘resulting’ trusts which revert trust assets to the settlor when an express trust fails; or ‘constructive’ trusts which are imposed by law where it is unconscionable for a person holding an asset to deny the beneficial interest of another person. These non-express trusts are not required to register unless they have a tax liability.
Some non-resident trusts are also now required to register, for example where they hold land or property in the UK, or have a UK resident trustee.
Trustees of jointly owned assets are required to register only if the beneficial owners and the trustees are not exactly the same people (although this does not apply to a bare trust of land where a maximum of 4 trustees can be registered on the title). This could catch out some situations where for example a beneficial owner has died and another person has inherited their interest in the asset, without becoming a trustee. In that situation, the trust must register.
Which types of trusts are excluded?
A few types of trusts are excluded from the new requirement to register, for example:
- Inheritance for bereaved minor children (under age 18) or adults aged 18 to 25, set up under the will (or intestacy) of a deceased parent
- Trusts created by a person’s Will that are terminated within 2 years of the date of death
- UK charitable trusts
- Some insurance policy trusts receiving benefits after the death of the person assured (but only if the benefits are paid out of the trust within 2 years)
- Some life or retirement policies paying out on death, terminal or critical illness or permanent disablement, or to meet healthcare costs
- UK registered pension schemes
- ‘Pilot’ trusts set up before 6 October 2020 holding no more than £100
- Co-ownership trust set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’
- Some types of commercial trusts created in the course of professional services or business transactions
I am a trustee – what should I do?
If you are the trustee of a trust which now needs to register, you should do so before the 1 September deadline. The registration process requires you to input personal details identifying the settlor, the trustees and the beneficiaries, as well as details of the trust and its assets. You will need to create a Government Gateway account through the gov.uk website. This all takes time, so we advise you to start the process as soon as possible.
If you are not sure whether you now need to register, you should seek advice from your solicitor or accountant urgently. Trusts which should have registered by 1 September 2022 may be charged a penalty if they are late.