Trusts continue to be a popular vehicle for individuals to protect their wealth and control how their assets are used after they have been given away. Trusts still offer considerable advantages, especially when estate and inheritance tax planning; however, there is soon to be more red tape.
As of March 2020, a new requirement will mean that all trusts will need to be listed on a government register, which will be partially open to the public. If individuals that hold trusts do not do so, they will be personally liable and could face penalties. This change comes following the implementation of the EU fifth Directive on Money laundering, which the UK government is allowing to be implemented despite Brexit.
Since 2017, when the Trust Registration Service (TRS) was first introduced, certain types of trusts have always had to report information to the TRS when an event occurred which caused a tax liability (CGT, income tax, IHT, stamp duty).
From March 2020, the rules will change, and all trusts will need to report information to the TRS. Even if there is no tax liability, trustees must submit information, albeit limited, about settlors, trustees and beneficiaries.
What’s more, all new trusts created after 10 March 2020 will be required to register with the TRS within 30 days, or by 10 March 2022, whichever occurs later. Additionally, as of 10 March 2020 any updates to the register must be completed within 30 days.
The New Rules
Under the new rules, the following trusts will need to register on the TRS:
- All UK trusts which have not previously registered;
- All new UK trusts created on or after 10 March 2020;
- Non-EU trusts which acquire UK land or property interests after 10 March 2020;
- Non-EU trusts which enter into a new business relationship with an “obliged” entity on or after 10 March 2020;
- “Obliged” meaning entities that are required to comply with UK money laundering legislation.
This will especially affect financial services products where investment bonds, life policies and discounted gift trusts are involved.
EU Registered Trusts
EU registered trusts are not required to register on the TRS maintained in the UK.
A consultation with HMRC is underway to decide whether certain trusts may be excluded from the requirement to register. This includes:
- Statutory Trusts;
- Bare Trusts;
- Life Policy Trusts;
- Charitable Trusts;
- Approved Pension and Shared Option Schemes.
These changes are predicted to increase the administration burden for many trustees. It is important for individuals that hold a trust to be aware as they will be personally liable and may face penalties if they fail to register.
For more information regarding the changes to registering trusts, please contact Simon Hosier at firstname.lastname@example.org