Trust Registration Deadline Dispensation
Trustees who missed the September 2022 deadline to comply with the expanded scope of the Trust Registration regime have been thrown a lifeline by HMRC, with the news that penalties will not be imposed on those who missed the cut-off date through ignorance.
Introduced as part of the UK’s implementation of the Fifth Money Laundering Directive, the new rules of Trust Registration are designed to counter terrorism and money laundering, with improved transparency on the ownership of assets held in trusts. They extend the scope of the trust register to all UK express trusts and some non-UK trusts, regardless of whether they pay tax.
What is a trust?
A trust is a way of managing assets such as money, investments, land or property, by the formal transfer of the assets to a trust fund, administered for the benefit of others.
The person who puts assets into a trust is the ‘settlor’ and the ‘trustees’ manage the assets in the ‘trust fund’ on behalf of the ‘beneficiaries’ who will benefit from the assets. Different types of trusts are taxed differently and HMRC has a guide to the different types.
Common reasons for setting up a trust include when someone is unable to manage the assets themselves, because they are too young or may have become incapacitated. A trust can also be used to protect family assets, or to pass on assets whether before or after death, allowing the settlor to set out how they wish the assets in the trust to be used or distributed. Common situations may be to provide for a spouse after death, while protecting the interests of any children, or to manage succession planning in a family business.
They are particularly useful when planning how money and assets should pass from one generation to another, especially when family structures are complicated by divorces and second marriages.
The trustees are responsible for managing the trust, making investment decisions and paying taxes, while fulfilling the objectives set out for the trust by the settlor.
Which trusts need to be registered?
Some trusts are excluded, in situations where they have a limited purpose and the structure is unlikely to be used for money laundering or financing terrorism, but generally more trusts are required to register, including UK resident trusts without UK tax liabilities and most bare trusts.
What information will be recorded?
In respect of taxable trusts, more information has to be provided about beneficial owners, including the settlor, trustees, beneficiaries, and other parties who exercise control over the trust. This includes the name, month and year of birth, country of residence, nationality and details of their beneficial interest in the trust. The record on the register must be kept up to date with any changes notified within 90 days of taking place.
What happens if you missed the September deadline for Trust Registration?
While the requirement remains, HMRC have recognised that many trustees are unaware of the change and have said penalties are unlikely to be imposed where the lack of action is due to ignorance. Unless, however, they were acting deliberately in missing the deadline.
But the clock is ticking for all trustees to ensure they comply with the new requirements if they are to avoid potential fines, which can be up to £5,000 per trust. If you are involved in a trust and are not aware of any action having been taken, or are unsure whether you need to comply, it really is time to act swiftly and get specialist advice.
Here to Help
Setting up a trust is a specialist area where professionals will generally be involved, to provide guidance and advice on the most appropriate route. For guidance on setting up and registering trusts, please get in touch with Bernard Flanagan, Senior Solicitor specialising in wills, trusts, probate and powers of attorney.
Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.