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Non-taxable trusts must be registered with HMRC

Remember that trust you created a few years ago? The deadline to register it is fast approaching.

In recent years, it has felt as though the reporting requirements for trustees have increased but this burden has mainly affected those trustees who have a tax liability. However, non-tax paying trustees will need to register their trust with HMRC by 31 August 2022 – or risk penalties.

Background

In 2017, money laundering legislation introduced by the EU (and adopted by UK) placed a requirement for certain details of a trust to be recorded on a register. Originally, this only applied to tax paying trusts i.e. those with a relevant tax liability (income, capital and inheritance tax, as well as stamp duty land tax and VAT).

The European legislation was extended to include all non-tax paying trusts within the scope of these reporting requirements and the UK committed to implement these changes domestically.

Tax Paying Trusts

Trusts which have suffered a relevant tax liability since 2017, should have already registered for HMRC’s Trust Registration Service and disclosed certain details of the trust, trustees, settlors and beneficiaries. The trust register should be updated on an annual basis (assuming a tax return is completed) and within 90 days of any changes (e.g. trustees).

Non-tax Paying Trusts

One bit of good news for non-tax paying trusts is that there is a slightly different route for these trusts which requires less information to be provided. Trusts which have not registered with HMRC previously, now need to create an account and complete the Trust Registration Service for non-taxable trusts. Once TRS has been completed, you will be sent a unique reference number (URN) in the post, by HMRC.

Terminated Trusts

If a trust was in existence on or after the 6 October 2020 and has since ceased, unfortunately, the trustees are still required to register the trust with HMRC and then “de-register” to notify them that the trust has ceased. If a non-tax paying trust was terminated prior to 5 October 2020, there is no requirement to make a TRS disclosure to HMRC.

New Trusts

Trust created before 2 June 2022 will still be required to register the trust with HMRC before 31 August 2022. Any trusts created after 2 June 2022 will be required to register the trust under TRS within 90 days.

Exemptions

There is a small and specific list of non-tax paying trusts that will not need to comply with the new reporting requirements. Below is a list of what we believe to be the most relevant exemptions, but a full list can be found on HMRC’s website, here :

  • Trusts created on death do not need to be registered for the first two years after death
  • Insurance policies and compensation pay-outs
  • Property ownership, but only where the legal owners are the same as the beneficial owners
  • Charitable trusts
  • Trusts were a disabled person is the beneficiary
  • Historic pilot trusts set up before 6 October 2020 which hold a value of £100 or less
  • Trust imposed by legislation or court order
  • Trust registered on a European Economic Area register
  • Bank accounts for minors

What’s Next

If your trust has already being registered, great! All that you should need to do is make sure you update the register within 90 days of any changes and update annually if a tax return is being submitted.

However, if you created a trust or you are currently a trustee and have any concerns over whether you’ve met the reporting requirements, then please do get in touch with your usual contact at BHP or Mark Trevenna.