Estate Planning / Inheritance Tax / News

New rules for UK Trusts

Trusts are a helpful part of the Estate planning process and can be used in a variety of situations, ensuring that your assets are easily passed on to beneficiaries according to your wishes, in a tax-efficient way. But some trusts have attracted attention for negative reasons, prompting additional scrutiny from the government and new layers of regulation. Steve Wright, our Estates Director, explores new rules being introduced for UK Trusts.

Trusts can be set up for lots of different reasons. Generally, they are a useful tax planning tool, helping to keep things as simple as possible when it comes to administering your Estate after your death. When setting up a Trust, you’ll naturally appoint a set of Trustees who are responsible for its running and who then act on your behalf when the time comes. As well as managing general duties, Trustees are also accountable for any reporting to the UK tax authorities.

This area of Trust administration was made more complex in 2017, when money laundering rules were tightened with the introduction of Trust Registration Service (TRS). The TRS was primarily established to create more transparency across the system, requiring some Trusts (those paying tax) having to register their existence. This also allowed law enforcement agencies access to information about Trusts to help them better tackle money laundering and terrorist financing.

On 1 September 2021 additional rules came into force making it compulsory to register a Trust with HMRC’s Trust Registration Service, even if the Trust doesn’t need to pay tax. There is a window of time in which to register a non-taxable Trust; those non-taxable Trusts created prior to 1 September 2022 must be registered by that date or within 90 days of creation whichever is the latest; those created after 1 September 2022 must be registered within 90 days of creation; failing to do so could create penalties.

Some exclusions of course apply, and there is thankfully still no need to register Charitable Trusts, Pension Trusts or those which qualify as a Trust for a disabled person.

But it’s worth noting that the onus is on the Trustees to register the Trust properly with TRS, check regularly whether it needs to file annual Tax Returns with HMRC and keep proper records about any meetings, decisions or payments made. Seeking expert advice from a professional adviser can help ensure that a Trust is properly set up and being managed effectively.

To discuss any aspect of Trust planning please contact your nearest office.