Trusts - do you need to register with HMRC?

Trusts - do you need to register with HMRC?

The HMRC Trust Registration Service (TRS) was established to meet the obligations of the fourth and fifth Money Laundering Directives (4MLD and 5MLD).

Since 2017, it has also existed to enable the registration of taxable trusts.

What can I take away from this?

An understanding that you may have a legal obligation to register a trust and the deadline for doing so is 1 September 2022.

What has happened?

The 5th MLD provisions have greatly widened the scope to bring in many other trusts for which registration was previously not mandatory.  Before the 5th MLD, it was necessary only to register if there was a tax liability, now any express trust needs consideration.  There are a number of exemptions available.

What type of trusts do I need to consider?

In the main, it should be obvious you have a trust that needs registering because it was taxable immediately and these include discretionary, interest in possession and settlor interested trust.  You will have been through the legal process of creating this type of trust and hopefully, it will already be registered with HMRC and filing annual tax returns.  If not, we recommend this be considered immediately.

Here are a couple of examples of when these new rules could apply:

• insurance policies written into trust which are not distributed within two years of the death of the insured.
• certain property ownership arrangements where the trustees and beneficiaries are not the same e.g. if Paul and Robin own a property as tenants in common and on Paul’s death his share goes to someone other than Robin, this will need to be registered.

What happens if I fail to register?

HMRC have the power to charge penalties for late registration although, at this stage, they are not automatic and will be considered on a case by case basis.

What should I do now?

Our recommendation is to give consideration to your financial arrangements and if there is something which you think may require registration, please get in touch and we can assist you in identifying whether a need to register exists.

How can Haines Watts help?

We advise clients with a broad range of payroll and dividend related matters throughout Exeter and beyond.

If you would like to have a conversation to understand the complexities of the above changes, please get in touch with your usual Haines Watts contact.