If you are a trustee of an existing trust or if you are creating a new trust, then you need to be aware of some recent changes to trust compliance requirements.
All UK “express” trusts (with certain limited exceptions) and some non-UK express trusts, taxable or not, that were in existence on or created after 6 October 2020 must register with and provide details to HMRC’s Trust Registration Service (TRS). This is a big change from previous requirements, where only trusts that had a UK tax liability were required to register details of the trust with the TRS.
Trusts that now need to be registered include most trusts created by wills, life interest trusts, discretionary trusts, and even bare trusts.
In practice, this covers most types of trust, so you should check to see if your trust needs to be registered.
In some cases, a trust holding a property needs to be registered on the Trust Register twice, both as a will trust and as a property trust.
The rules will catch out many trustees who hold non-income-producing assets, such as a house. For example, if parents hold property on trust for themselves and their children, or when a minor child inherits property and that minor child’s parents are named on the Land Registry title until that child turns 18. It may also affect trustees who don’t even know they hold assets on trust. For example, where an elderly parent and an adult child open a joint bank account together, where the parent provides all monies so the child can help their parent manage their finances, the monies are held on trust for the parent. Instead of doing this, to reduce unnecessary compliance, we would advise that people make Lasting Powers of Attorney.
There are certain limited exceptions to registration, including for trusts of jointly owned property where the owners and beneficiaries are the same people, charitable trusts, trusts imposed by a court order/legislation, and certain pilot trusts in place before 6 October 2020. Under draft legislation, a welcome new exception is a trust created to set up a bank account for a minor or vulnerable person.
Trustees must note, however, that if an excepted trust has a UK tax liability, it will still need to register with the TRS.
Non-taxable trusts must be registered with the TRS by the later of 1st September 2022, or 90 days from the date the trust is created. A registerable trust that has existed at any time on or after 6th October 2020 must be registered with the TRS, even if it was closed before the service was fully opened on 1st September 2021. If the trust is taxable, the registration deadline depends on various factors, so please get in touch with our specialist Trusts team, who will be able to advise you further.
Penalties for not registering the trust and not updating HMRC with any changes have not been decided. However, it has been indicated that financial penalties could arise and may be payable by trustees personally rather than by the trust.
If you are a trustee of an ongoing trust, you must consider whether your trust needs to be registered and should take steps well in advance of the registration deadline to register the trust. If you want to discuss how changes in trust compliance might impact the trust, then do not hesitate to contact a specialised Trusts Solicitor.
Bik-ki Wong, Partner and Head of the Wills, Trusts and Probate Team at Myerson