Using trusts is common in financial planning. Trusts can make sure that your wealth is distributed to your chosen beneficiaries and can also help to ensure that they are not part of your estate for Inheritance Tax (IHT).
The increased use of trusts has brought about new financial planning opportunities for many people, however they also present fresh opportunities for financial crime. The European Union’s (EU) 5th Anti-Money Laundering Directive is designed to prevent the use of the financial system for the purposes of money laundering or terrorist financing. The introduction of the Trust Registration Service (TRS) forms part of this.
Until now, trusts that incur some type of tax liability have had to be registered on the TRS. But trusts where the trustees have had no tax to pay, have so far not had to register.
However, as a result of the EU Directive, this position has now changed. Most trusts (with certain limited exceptions), must now be registered with the TRS by no later than 1 September 2022, irrespective of whether the trustees have any tax to pay.
What type of trusts need to be registered?
These are broadly:
• All UK express trusts, unless they are specifically excluded
• Non-UK express trusts that:
o Acquire land or property in the UK.
o Have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.
A trust holding an investment bond (such as a Gift Trust, Discounted Gift Trust or Loan Trust) is a good example of the type of trust where the trustees haven’t yet had a tax liability, due to their tax-deferred status. In addition, the trustees wouldn’t be the taxable parties where the settlor is still alive in the tax year of a chargeable event, or where segments are assigned to beneficiaries to move the tax point to the beneficiaries. These would fall within the ‘non-taxable trust’ category but are now required to be registered.
For further information on which trusts do and don’t need to be registered by 1 September 2022, please visit: www.gov.uk/guidance/trust-registration-extension-an-overview.
If you do not register your trust with the TRS by this date, HMRC will initially issue fixed financial penalties. HMRC will enforce more stringent penalties if trustees deliberately ignore the registration requirements.
Who is responsible for registering the trust?
The trustees are responsible for registering the trust with the TRS. The lead trustee will be the point of contact for HMRC and they will be responsible for keeping information on the Register up to date. If you have already registered a trust under the previous requirements, you may now have to provide more information than you have in the past.
The information required includes:
• The name of the trust.
• The date the trust was created.
• Personal details of the settlors and trustees.
• Personal details of the beneficiaries.
• The type and value of trust assets.
It will also be necessary to maintain and update the register with any changes to the above information. If you set up a new trust, the trustees must also register this with the TRS within 90 days.
How to register
You need to register the trust via the government website, so you will need to have an organisation government gateway user ID and password. If you do not have one, you can create one the first time you register. You’ll need a government gateway user ID for each trust you want to register.
You can find out further information on the registration requirements on the government website www.gov.uk/guidance/register-a-trust-as-a-trustee#who-should-register, or by scanning the QR code here.
Reviewing trust arrangements
Trusts play a valuable role in financial planning, however the rules around them can be complex. Your Origen adviser can help to confirm if you need to register a trust, provide guidance on your trustee responsibilities and provide you with advice on the trust as part of your wider financial plans.