Following the introduction of the EU’s Fifth Anti-Money Laundering Directive, the UK government is committed to compiling a complete list of express trusts in the country.
What is the Trust Registration Service?
The TRS, has been with us now for a number of years, but up to this point only trusts with a tax liability have been required to be registered.
Inevitably, as with any online system, there have been teething issues, but the system has now largely calmed down and works reasonably well.
However, the functionality needed to extend the system to accommodate the new rules to include all trusts, and not just those with a tax liability, is still not in place, even though the original deadline has long since passed.
What is the time limit for registering a trust with HMRC?
If a trust is created (by will or during someone’s lifetime) then under the current rules the trust (if taxable) must be registered on the TRS within 30 days.
This will prompt, in most cases, the creation of a self-assessment record for the trustees, who will then be required to complete annual self-assessment returns on behalf of the trust.
Which trusts need to be registered with HMRC?
The scope of the rules has now been broadened out so that all UK express trusts, with or without any tax liabilities, will need to be registered, as will various non-UK trusts (beyond the scope of this article).
Exclusions do apply, but they are limited. The most relevant of those exclusions, for trusts with no current tax liability, for our clients are:
- A trust created by the intestacy rules.
- A trust created by a court or tribunal order.
- A trust of a life policy or pension policy that pays out on death, terminal or critical illness or to meet healthcare costs.
- Pilot trusts created before 6 October 2020 with less than £100 held in them.
- A will trust within its first two years.
- A trust of jointly held property, but only where the trustees and the beneficiaries are the same people.
- A trust that qualifies as a bereaved minor trust or an Age 18-25 trust.
- Personal injury trusts.
Do bare trusts need to be registered?
Perhaps the most significant omission from the above list is the humble “bare trust”, a trust where for example A and B as trustees hold assets for C, perhaps done for anonymity purposes or to protect C from himself or others.
What about declarations of trust?
Another problem area will be those arrangements that have been set up where there is a declaration of trust protecting a third party’s interest in property or land. The so-called “bank of mum and dad” arrangements in the past will certainly have included declarations of trust where the trustees and the beneficiaries are not the same people.
Our advice
As solicitors we will have set up a number of bare trusts or property declarations of trust which will soon need to be registered but, like most solicitors, we will not have a separate list of them as we do for express trusts.
If you are reading this and think you might have such a declaration of trust then our advice is to review it now, in case it will soon have to be registered on the TRS.
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