HMRC’s Trust Registration

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In 2017 HMRC introduced its Trust Registration Service (TRS) to register the beneficial ownership of trusts.

The new rules came into force in October 2020 requiring all UK trusts (apart from a few exceptions) to be registered with HMRC before 1 September 2022. Previously only trusts paying certain taxes were required to be registered. The new rules widened the scope of registration which means some trusts that did not need to be registered because no taxes were payable, may now require registration. If you are a trustee, you need to carefully consider whether you are required to register the trust. All trust records must be accurate and kept up to date.

Our private client team commonly identifies trusts in estates and co-ownership trusts that require registration.

What is an express trust?

An express trust is often created by the Will of the Deceased. A residuary estate trust becomes registerable if a Will contains wording stating that the Executor holds the estate ‘upon trust’’ and if the administration of a Deceased’s estate takes longer than two years from the date of death to administer. If an estate administration is completed within two years and is fully distributed within that time, registration is not required.

Co-ownership arises when more than one individual owns a property. A co-ownership trust arises where the individuals named on the title deeds (the legal owners) of a property are different to those who are entitled to the equity in the property (beneficial owners).

HMRC guidance

HMRC guidance states that where the legal and beneficial owners are identical, there is no requirement to register. If the legal and beneficial owners ever change or are different, the co-ownership trust may need to be registered. For example, the ownership could change because the property owner entered into a Declaration of Trust benefiting other parties to a share of the equity or on death, the legal owners’ share held as tenants in common with the other joint owner, passes by their Will to another party.

The trust register contains details about the trust, the details of the trustees, settlor, and beneficiaries, as well as details of the assets held.

What if you fail to register a trust?

In the event that Trustees fail to register a trust or maintain up to date details on the trust register, HMRC has the power to impose a fixed penalty of £5000 against the trustees, who are personally liable to pay these penalties. Any changes to the trust record must be reported by the trustees within 90 days of the trustees becoming aware of the required change. Changes might be a change of trustee or lead trustee, change of beneficiaries, death of settlor, tax, closing a trust, or mental capacity of any party (capacity is currently optional but may become compulsory). Penalty charges are issued on a case-by-case basis with HMRC recognising that Trustees may not be familiar with the process.

Since the introduction of TRS, HMRC has regularly updated the guidance. You can register a trust by using the Government website or you can instruct professionals such as ourselves to assist. Any trustee who is unsure of the requirements and their responsibilities should get in touch.

How can we help?

HMRC’s Trust Registration

Amanda Voakes is a Partner in our expert Wills and Probate team, advising on Inheritance Tax planning, Wills, administration of estatesgrants of Probate, grants of Letters of Administration, Powers of Attorney, administration of affairs, and residential care fee planning/protection of assets.

Amanda is an accredited member of The Association of Lifetime Lawyers (formerly known as Solicitors for the Elderly or SFE) which is a membership body for legal professionals. Members of the group are the most qualified lawyers in the country when it comes to supporting older people and those in vulnerable circumstances who may need extra help and support. Lifetime Lawyers receive expert training and best practice guidance to offer the very best advice.

If you require any legal advice on the above subjects, please contact Amanda or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.

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