Taxation

The UK Trust Register

Chris Stedman
Senior Partner
October 23, 2020
    
5 min read

  1. It is the way in which trusts which are liable to UK income tax and capital gains tax must register their existence with HM Revenue & Customs; and
  2. It fulfils the UK’s obligations under the EU’s Fourth Anti-Money Laundering Directive to maintain a central register of the beneficial ownership of tax-paying trusts.

All a bit of a pain but the worst is yet to come…

The EU’s Fifth Anti-Money Laundering Directive is now being implemented. Most of us thought we had left the EU behind some while ago but there we go. The main changes are:

  1. All UK express trusts will have to register details of beneficial owners whether or not they have UK tax liabilities.
  2. Trusts already registered will have to provide some additional information about their beneficial owners.
  3. The Register must be available to anyone with a “legitimate interest”. The UK is taking a very restricted view on this requirement and access will be available only to those entities engaged in fighting money laundering and terrorist financing.

Excluded Trusts

The following trusts are specifically excluded from registration:

  1. Legislative Trusts-e.g. statutory trusts imposed on intestacy or co-ownership of land.
  2. Trusts of certain insurance policies.
  3. Charitable Trusts.
  4. Will Trusts where the trust is holding only the property comprised in a person’s estate on death and the death was less than two years ago.
  5. Death Benefit Trusts where the trust is holding only benefits received on the death of the person assured under a policy and the death was less than two years ago.
  6. Pilot Trusts holding property with a value not exceeding £100 and created before the Regulations come into force.
  7. Trusts meeting legislative requirements-e.g. trusts for bereaved minors, heritage funds and personal injury trusts.
  8. Bare Trusts.

Registration Deadlines

Non-taxable trusts

  1. Trusts which are in existence before 9 February 2022 must register on or before 10 March 2022.
  2. Trusts coming into existence on or after 9 February 2022 must register within 30 days of creation, or if later, within 30 days of becoming registrable.

Taxable trusts

  1. Trusts created before 6 April 2021 have the old deadlines so must register by 31 January 2022.
  2. Thereafter 30-day deadline applies.

Penalties

The new regulations will be supported by a robust penalty system although the indications are that the government will apply a light touch approach to begin with.

Example

Arnold died on 30 September 2017. In his Will he left his half-interest in the matrimonial home to his two children but made provision for his widow to live there rent-free as long as she needed to. His Will created an interest in possession trust but as there were no tax implications his trustees did not have to register it under the previous regulations.

Under the new regulations the trustees must register this trust by 10 March 2022. If the widow dies before this date there will be no need to register. Either the property will have been sold and the proceeds distributed to the remaindermen (the children) or if the property is still unsold each of the two children will have an absolute interest in one half of it. The trust will therefore be a “bare trust” and therefore excluded from the new regulations.

Trusts can be used to advantage in many situations and are particularly beneficial as an inheritance tax planning tool. Contact C & H Stedman for more information.

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