Background
Many families use trusts, for a wide variety of reasons. Sometimes this is done during an individual’s lifetime; more often, they are set out in a will. Trusts might, for instance, be used to make long-term provision for children or grandchildren; to preserve assets against some foreseen risk (such as a beneficiary’s divorce, bankruptcy, or care needs); or as part of tax or succession planning.
The government has introduced legislation which is intended to reduce the risk of trusts being used for money laundering. Under this legislation, most trusts will need to record their details – in particular, the identity of the underlying beneficiaries – on the online Trust Registration Service register.
However, while intended to make matters harder for criminals, the legislation presents a significant additional burden for those using trusts for legitimate purposes. This is particularly true for those trusts that were designed simply to hold assets until some future event, and do not earn any income or make chargeable gains – for example, a trust of a home someone is living in. Historically, HMRC has taken the view that they do not need to know about this kind of trust, because there is no tax to pay. That is no longer the case.
Who does this affect?
Most of the time, if you are a trustee, you will know about it! But – particularly with the kinds of asset protection trust that are set up to be as unobtrusive as possible, ticking away quietly in the background until they are needed – you could have responsibility for a trust which you haven’t needed to think about in a long time.
There are also some situations where you might be treated as having set up a trust, even though you never thought of the arrangement in those terms; for example, whenever people own a house together, the law treats this as a trust.
Particular care may be needed if:
- You have been the executor of an estate (in which case, you should check the will for any mention of trusts);
- You were the beneficiary of an estate, and the terms of the will gave you a right to benefit from property that you do not own outright;
- You have set up a trust or know you are the trustee of a trust; or
- You own property jointly and one or more of the owners don’t have their names listed on the title deeds.
Importantly, HMRC have taken the view that any trust that existed in October 2020 will need to be registered – even if it has since been brought to an end.
Do all trusts have to be registered?
All express trusts (that is, trusts created deliberately by some written document, such as a deed or will) have to be registered unless an exemption is available.
For example, there is an exemption for jointly owned property or land where all the beneficial owners’ names appear on the title register at the Land Registry (and no one else is on the register).
Another example is a trust created in a will that is brought to an end within two years of death.
However, because it is not always straightforward to decide whether an exemption applies, we are recommending all trustees seek advice before relying on an exemption.
What do trustees need to do?
If you are responsible for a trust, you should take advice to ensure you are complying with your legal obligations – including your obligation to register the trust.
Even if the trust was registered in the past, the rules around what needs to be included in the register may well have changed and you now have a responsibility to ensure the register is up to date and to report any changes, even down to changes of address for the people connected with it.
If you want to find out more, or would like help with registering a trust, speak to a solicitor in our trusts team today and find out how we can help. Contact us on 03456 465 465 or email enquiries@rotherabray.co.uk
