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New trust registration rules: What you need to know

New trust registration rules: What you need to know

The rules about which trusts should be registered in the UK have changed. Previously there was no requirement to register trusts with no tax liability. However, HMRC now requires that most express trusts be registered, even those without a tax liability, and the deadline is rapidly approaching.

For trusts that were created on or before 6 October 2020 the deadline is 1 September 2022. Those created after 6 October 2020 need to be registered within 90 days of being created or becoming liable for tax, or on or before 1 September 2022 (whichever is later).

Why do I need to act now?

The new registration rules were announced in 2020 but, after an initial surge of registrations Canada Life estimates around 170,000 will need to be registered each month to make the deadline. We strongly urge any Trustees to register as soon as possible to avoid any potential technical issues that could result in delays in registration.

What does this new rule apply to?

We have mentioned express trusts and there are a few exceptions. You will find more information here on the exclusions. It is important to bear the following points in mind:

  • Bare trusts – those holding stocks and shares for children/grandchildren need to be registered. Bare trusts for parents holding bank accounts for minors do not. So, if you hold investments for your children or grandchildren this will need to be registered.
  • 5% drawdown bonds - most life insurance bonds are written into trust when set up. If the policy only pays out on death, terminal illness, or to meet healthcare costs of the person assured it does not need to be registered. If it pays out for any other reason including the 5% drawdown it will need to be registered.
  • Land - where the beneficiaries and trustees/legal owners are different it will need to be registered unless it is held for minor children.
  • Pilot trusts – pilot trusts set up before 6 October 2020 that hold less than £100 of value do not need to be registered. If the value goes over £100 it will need to be registered. Pilot trusts set up after 6 October 2020 need to be registered.
  • Non-UK express trusts with a UK link – links include having UK trustees, land in the UK, or a UK business relationship.

 

If you do not register a qualifying trust before the deadline, penalties may be applied. These are currently expected to start with a fixed £100 penalty and increase to up to 5% of any tax liability or £300, whichever is greater.

The team at Creasey’s is here to help you. If you need guidance on whether your trust should be registered or help with the trust registration process, we can advise. Please email natalie.butt@creaseys.co.uk for more information.