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Trust Registration

Written by: Edward Danks
Category: Private Client
11 October 2022

Discretionary Trusts have had to be registered with HMRC for some time. However, since 1 September 2022, many more trusts now need to be registered, whether they need to pay tax or not.

Why did this change happen?

This change came about as a result of the provisions of Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The purpose of these regulations is to ensure there is information available about the beneficial owners of trusts to ensure they are not used for criminal purposes. However, despite being designed to flush out criminality, the regulations have the wider ranging effect of bringing greater transparency to the world of trusts.

The regulations introduce the concept of “express trusts”. HMRC define express trusts as “An express trust is a trust created deliberately by a settlor, usually (but not always) in the form of a document such as a written deed or declaration of trust.” They also say that most trusts are express trusts. On the basis that registration has been extended to express trusts, most trusts now need to be registered with HMRC.

In addition, any new express trust created after 1 September 2022 must be registered with HMRC within 90 days of its creation.

Are any trusts excluded?

Certain trusts are excluded from registration. The kinds of trust that are excluded are:

  • Trusts of life policies
  • Trusts created by a Will (provided the estate is wound up within 2 years)
  • Trusts for bereaved minors
  • Age 18 – 25 Trusts
  • Trusts registered with the Charities Register (Charitable Trusts)
  • UK Registered Pension Schemes

You can view a full list and description of excluded express trusts by clicking here.

What happens to trusts created in a Will?

As shown above, there are exclusions of trusts created in a Will where the estate is wound up within two years or if an 18 - 25 trust is created.

However, if the estate is not wound up within two years, any other trust provisions contained in the Will need to be registered.

Do liferent trusts need to be registered?

There are two types of liferent in Scotland – a proper liferent and trust (improper) liferent.

A proper liferent is where a title to a property is owned by the liferenter during their life and the fiar who will have ownership of the property on the death of the liferenter. Where the title is registered in this manner, there are no trustees, it is not strictly a trust and that means it does not need to be registered as a trust. However, where a proper liferent is created in a Will but where the title has not been registered in the name of the liferenter and fiar within two years of the date of death will need to be registered.

However, trust (or improper) liferents, set up by a settlor in a trust deed where trustees have been appointed who then hold the property for the benefit of the liferenter need to be registered with HMRC.

What information does HMRC need?

The names and contact details of the trustees, the beneficiaries and the individual who set up the trust must be supplied. In addition, the date the trust was set up and what assets are held must be provided. One trustee needs to assume the position of “lead trustee” and that trustee needs to provide additional information.

If there are any changes to the trust, these changes must be notified to HMRC.

There is no grace period in relation to trust registration, but HMRC are conscious of the fact that it will be a colossal task to register all express trusts and will not apply any penalties for late registration unless the trustees deliberately delay registration.

What should I do if I am a trustee?

You should take professional advice about registering the trust if it has not already been registered.

If you need any advice or support with the registration process, please contact us as soon as possible as the deadline for registration has now passed.

Written by:

Edward Danks

After graduating from the University of Dundee, Edward joined the firm in 1996. He lives in North Berwick with his wife and family. Outside office hours, Edward is likely to be found on one of the many local golf courses. He works hard at maintaining his handicap of three. Edward is also the Head Coach for the under 9 and under 11 teams with North Berwick Girls Football Club and in his spare time enjoys five-a-side football and tennis.

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