There is a new requirement for Trust registration. Up to one million new and existing express trusts, even those without tax consequences, must be registered with the Trust Registration Service at HMRC by 1 September 2022.
HMRC are still deciding the penalties for late submissions for trust registration, but initial proposals are that trustees who fail to register will face penalties of up to 5 per cent of the trust’s tax liabilities or £300, whichever is greater. Financial penalties may be waived for first offences, although this is not yet been confirmed by HMRC.
Those penalties may be payable by the Trustee personally as the Trustee Act 2000 imposes a statutory duty to exercise such skill and care as is reasonable in all the circumstances. The standard required takes into account the trustee’s experience, any special knowledge and whether he/she is acting in a business or professional capacity. If you are a trustee and fail to register the Trust then you have not exercised care, potentially making you liable.
If you are unsure as to whether the Trust that you handle has been registered, know of a Trust that must be registered or you have any questions about your Trust or the Trust Registration Service, please do not hesitate to contact Hibberts LLP on 01270 215117 and ask for Richard Hey.
What is a trust?
A trust is similar to a “Safe Deposit Box” holding valuable contents for somebody else’s benefit. The person who wants to set up the trust puts cash or other assets into the Safe Deposit box and locks it.
The keys to the box are held by trustees. The trustees can unlock the box, change the assets inside and distribute the contents in line with the terms of the trust.
Who is involved with a trust?
There are three key roles within a trust – the settlor, the trustees, and the beneficiaries.
The settlor is the person who establishes and puts assets into the trust. Settlors are usually individuals or couples. The Settlor can set up a trust in several ways either via a will (Post Death Trust) or whilst the Settlor is alive.
The trustees are the people who control and oversee the trust. Anybody can act as a trustee if they are over 18 and have full mental capacity. Often the settlor will act as a trustee to keep an element of control over the trust, there are various types of Trustees, if you wish to know more, please give us a call.
The beneficiary of the trust benefits from the arrangement. For example, they may receive money from the trust or the right to occupy a property. Certain trusts give the trustees discretion over how and when these benefits are given to beneficiaries.
Beneficiaries can be individuals or a class (i.e.) children or grandchildren, they don’t have to be human, Dogs, cats even hospitals. The trust deed would distinguish what type of beneficiaries they are (i.e., life tenant, discretionary object etc.).
Trusts and tax
Different types of trust are subject to Income Tax, Capital Gains Tax, and Inheritance Tax in different ways. The rates and allowances vary according to the type of trust and how the beneficiaries stand to benefit from them.
We are supporting clients in understanding Trust registration, so if you are not sure, please contact us, it is better to have the advice than the fine.