Deborah White, DipPFS – Charter Financial Planning – part of One Four Nine Group
I am tempted to suggest the term Trust Registration is an oxymoron. The definition of trust in the English dictionary is ‘to rely on the truthfulness or accuracy of,… to place confidence in’. Whereas registration is defined as ‘the process of entering information about something’: one assumes information that would otherwise go undisclosed through lack of trust. Putting such musings aside in reality there has long been a requirement to register at least some trusts. I’m sure all fellow advisers are familiar with form 41G. However, this did not collect sufficient information to comply with the 4th Money Laundering Directive (MLD) so in June 2017 the HMRC Trust Register came into effect – to improve transparency around the beneficial ownership of assets held in trusts. Information by way of an annual declaration was required on settlors, trustees and potential beneficiaries in respect of express trusts (those deliberately established by a settlor) if they incurred certain UK tax liabilities including Capital Gains Tax, Income Tax, Inheritance Tax and Stamp Duty Land Tax.
However, as part of the UKs implementation of the 5th MLD from the 6th October 2020 the registration requirement for trusts has been extended to:
- All express trusts irrespective of whether a UK liability to tax arises
- Any trusts that acquire land or property in the UK on or after the 6th October 2020 and
- Non express trusts and trusts that would otherwise be excluded which have a UK tax liability
Well, that’s nice and clear. There are trusts that are specifically excluded from the requirement to register although these are broadly limited to:
- Charitable trusts
- Trusts where the beneficiary is a disabled person
- Trusts created either through legislation or a court order and
- Trusts created on death that are only in existence for a period of 2 years or less
So what does this mean for Advisers?
Generally speaking, the impact on advisers and their clients will be broadly limited to registering the following:
- Any trust that has either an onshore or offshore investment bond, Collective or DFM within it
- A designated unit trust (where a bare trust has been created through intent)
- Any trust holding the surrender proceeds of a protection plan. Any existing protection plans do not need to register even if they have a surrender value and
- Any spousal bypass trust set up on or after the 6th October 2020
There may be other instances but these probably cover the majority of trusts set up by financial advisers.
What, Who, How and When?
If you have a client with a trust that needs to be registered it must be done by the 1st September 2022 or within 90 days of it being set up, whichever is later. Furthermore, the trust registration service must also be kept up to date with any changes; for example, change of trustee and again such updates must be made within 90 days.
In practice it is the responsibility of the trustees to ensure the registration of the trust. All trustees are equally legally responsible although a nominated (lead) trustee is required to complete the registration and be the main point of contact for HMRC. The extent to which advisers, who are involved in the establishment of the trust and in the main recommend the appointment of lay trustees, wish to get involved is a decision for them. In practice if all the information is to hand, once the gateway user ID has been obtained completion of the online system (www.gov.uk/guidance/register-a-trust-as-a-trustee) should only take a few minutes. However, there can be little doubt that at the very least clients will need to be made aware of their responsibilities.
Non-UK trusts will also have to register if the trust holds land or holds assets liable to tax on UK source income. Each trust, even where established for Rysaffe planning, must be separately registered. Failure to register a trust by September 2022 will not only result in a fine, for the trustees, but will make it very difficult for the adviser to continue to work with the Trustees. And finally, be careful of the use of Agents: the payment of a fee by someone connected to the trust could be considered an addition to the trust. At the very least Advisers will need to make clients aware of their responsibilities. On the flip side helping clients can not only reaffirm the value the adviser adds but may also represent an opportunity to re-engage.
The article was published by Money Marketing here.