All about the HMRC Trust Registration Service
Property or land is often held in trusts or other family ownership arrangements and therefore property owners should be aware of new HMRC reporting requirements.
New rules were introduced on October 6 2020, as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), which extended the scope of the Trust Register to all UK and some non-UK trusts.
However, the rules not only affect trusts but some other common ownership arrangements.
Previously, only trusts subject to a UK tax liability were required to be registered. However, the introduction of the new rules means that many more trusts must now also be registered.
The trust must be registered if it becomes, or is liable for: capital gains tax; income tax; inheritance tax; stamp duty land tax or stamp duty reserve tax.
The following types of trusts must register,even if there is no tax liability: all UK express trusts unless exempt, which includes discretionary trusts and declarations of trust; non-UK express trusts (for example, trusts that acquire land or property in the UK); trusts created to hold savings products, such as insurance bonds.
The term “UK express trust” broadly refers to a trust deliberately created by a settlor, which may be in the form of a deed or declaration of trust, and includes common family arrangements, such as jointly owned land and property where the legal owners are not the same as the beneficial owners.
Other common types of trust that are caught by the regulations and need to be registered are: a trust created by a will where the trust still exists after the second anniversary of death. This includes, bare trusts, life interest trusts as well as discretionary trusts; a discretionary trust that is created during that person’s lifetime; a will trust that, although is less than two years old, has had property added to it from outside of the estate; and a bare trust of property.
The deadline for registrations are: Nontaxable trusts in existence on or after October 6 2020 by September 1 2022. Nontaxable trusts created after September 1 2022, within 90 days. Additionally, any changes to details or circumstances of the trust mean that the TRS must be updated within 90 days of the change taking place.
As for penalties, HMRC’s guidance states that the lead trustee may have to pay a penalty if they fail to register the trust before the registration deadline, which will be September 1 2022 for many trusts, or fail to tell HMRC about any changes to the registration.
Certain trusts do not need to register unless they are liable to pay UK tax.
These include: co-ownership trusts set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as ‘tenants in common’; charitable trusts which are registered as a charity in the UK or which are not required to register as a charity; ‘pilot’ trusts which were set up before October 6 2020 and which hold no more than £100. Pilot trusts set up after October 6 2020 will need to register.
Should the trust be subject to tax, the Trust Register will have to be updated annually or by a declaration stating that there are no changes.
If the trust is not taxable this is not needed.