Important Changes for Trusts & Trustees

Important Changes for Trusts & Trustees

New rules were introduced which extended the scope of HMRC’s Trust Register to the majority of UK and some non-UK Trusts. The changes meant that many more Trusts would have to register with HMRC whether or not they had a tax liability.

Under the new rules, organisations and persons involved in preventative work in the field of anti-money laundering, counter terrorist financing and associated offences, can request access to details on the register about the people associated with a Trust. The information will only be released on request in certain limited circumstances.

Access to the register is available online and Trustees should by now have completed the registration process. If not, you are strongly urged to take action now. It is also important to note that there is an ongoing requirement to keep Trust information up to date.

Which Trusts must be Registered?

The changes apply to most trusts used in financial planning, for example Discounted Gift Trusts, Gift Trusts and Loan Trusts. These trusts usually don’t have any tax charges year on year as they most commonly contain only an Investment Bond, meaning there is no tax charge until such time as a chargeable event occurs (and where that causes tax to be payable by the trustees). With a relevant property trust, there is the possibility of IHT periodic or exit charges every 10 years or exit charges if the trust assigns the bond to a beneficiary.

The following is a list of the main types of Trust that do not need to register. Unless on this list it is appropriate to assume registration is required:

• Statutory trusts, such as those arising on intestacy
• UK-registered pension trusts
• Charitable trusts regulated in the UK
• Trusts containing only pure protection life insurance policies and those paying out on critical illness or disablement, including group policies
• Trusts for vulnerable beneficiaries or bereaved minors
• Personal injury trusts
• Will trusts created on death that receive assets only from the estate and trusts that receive death benefits only from a life insurance policy and are wound up within two years of death
• Existing trusts holding assets valued at less than £100 unless/until further assets are added
• Trusts holding the proceeds of Life Insurance policies and which will distribute these within two years of the death of the Settlor.

What are the Timescales?

Trusts set up after 10 March 2020 must register within 30 days. Many product providers will not accept an investment application without evidence that the Trust has already been registered. We also expect this to be the case in relation to Bank Accounts.

Once registered trustees have 30 days from when they are aware of any changes to update the details and this is an ongoing requirement.

 How do I register?

Whilst we cannot do this for you, most accountants and some solicitors will be able to do it, or you can of course choose to register yourself.

https://www.gov.uk/guidance/register-a-trust-as-a-trustee

Before you can register a trust as a trustee, you need to have a Government Gateway user ID and password. You will need to apply for a Government Gateway user ID for each Trust individually. To obtain one you will need:

• an email address (this will be linked to the trust’s Government Gateway account)
• your full name

You must select an ‘Organisation’ Government Gateway account to register. If there is more than one trustee, it is recommended you give them the Government Gateway user ID and password once you’ve set these up.

After you have registered, HMRC will send the lead trustee a UTR, usually within 15 working days. You’ll need the UTR to start filing Self-Assessment tax returns.

Once registered, future charges to the Trust details, such as changes to the Trustees or Beneficiaries or additional gifts into the Trust can be made via the management service:

https://www.gov.uk/guidance/manage-your-trusts-registration-service

If you would prefer not to do this yourself and you do not have an accountant, please contact us and we will happily put you in touch with someone who can help.

What information will I need?

HMRC state you will need the following information and whilst there is plenty of time before the registration deadline, you should start to collate the information and begin the registration process now. Whether you complete the registration yourself or rely on your accountant to do so, the same information will be required. Begin by getting together the paperwork that created the Trust. You will need to provide:

• the name of the trust
• the type of trust
• details about how it was set up
• the date the trust was created
• the trust’s UTR if it has one

All trustees are equally legally responsible for the trust, but you must nominate one ‘lead’ trustee to be the main point of contact for HMRC. The lead trustee will receive the trust’s UTR and reminders to file a tax return. You will need to keep their contact information up to date. You’ll need to provide their:

• name
• date of birth
• National Insurance number and address (if they’re a UK citizen)
• passport details and address (if they’re not a UK citizen)
• telephone number
• If the lead trustee is an organisation, you’ll need to provide their organisation name, organisation UTR, address, telephone number and email address

A settlor is an individual or an organisation who has put assets into a trust. You must provide their name, and if available their:

• date of birth
• date of death
• National Insurance number (if they’re a UK citizen)
• address
• passport details and address (if they’re not a UK citizen)

 For other individuals involved in the trust including more trustees, living settlors, protectors and beneficiaries you must provide their:

• name
• date of birth
• National Insurance number (if they’re a UK citizen)
• address
• passport details and address (if they’re not a UK citizen)

You must give the details of all known beneficiaries who can benefit from the trust. If you have more than 25 beneficiaries in any one beneficiary type, keep a note of additional beneficiaries for your own records.

You must give details of all individuals, trusts, charities and organisations named as beneficiaries in the deed.

Some named beneficiaries will only benefit when a certain event happens, such as when another beneficiary dies. You can include these ‘potential beneficiaries’ in a class of beneficiaries until the event occurs. At that point, please provide their details on the register as a named beneficiary.

 You can use a ‘class’ of beneficiaries to describe a group of individuals who are not yet known or named individually in the trust deed, for example, future grandchildren. This can also include named potential beneficiaries. When a member of a class of beneficiaries benefits from the trust, and so becomes known, you must give their details.

You will be asked to provide a description of each class.

Example – Bill sets up a trust for the benefit of his grandchildren, including any that are not yet born. The trust deed also says that his niece Mary may benefit at the trustees’ discretion, and that if Mary dies the trustees can make a payment to his nephew John. The trustees can include the grandchildren in a class of beneficiaries because they are not specifically named or their names are not known. The trustees must give Mary’s details because she is named and can benefit from the trust. They can include John in a class of beneficiaries as he can only benefit when Mary dies.

Some years later, the trustees make a payment to one of the grandchildren, Sarah. Mary also dies, and the trustees make a payment to John. The trustees must give Sarah’s details on the register as she has benefitted from the trust and her name is known. They must also give John’s details because he can now benefit too.

Finally, you need to provide information about the assets of the Trust. This might include:

Shares – you’ll need the share company name, number of shares, class and type of share and approximate value of the shares when you register the trust

Property and land – you’ll need the address, name or description of the property or land estimated full value of the property or land at the time of registering the trust estimated value of the portion of land or property held in trust if it does not own it all

Money – you’ll need the total amount of money in the trust.

Other assets (such as cars, jewelry or art) – You’ll need a description of the asset and the value of the asset when you register the trust.

Record Keeping

HMRC guidance on what records Trustees should keep is as follows:

In all cases, you should keep the following:

• bank statements for current and deposit accounts
• confirmation of interest paid into bank or building society accounts
• national savings bonds or certificates
• certificates issued by life assurance companies
• dividend vouchers from companies and unit trusts
• stockbroker reports and records of dividends
• details of expenses paid by the trustees
• details of all taxes paid by the trust
• records of income payments to beneficiaries, if you’re the trustee of a discretionary trust

You should keep details of any transactions made using online bank accounts, as they may not send you paper statements.

Trustees of all express trusts must keep a written record of the following information:

• the full name of the trust
• the date the trust was created
• the country where the trust is considered to be resident for tax purposes
• the place where the trust is administered
• a contact address for the trustees
• the full name and address of any advisers who are being paid to provide legal, financial or tax advice to the trustees in relation to the trust

 The lead trustee must keep the following records for all settlors, trustees and beneficiaries:

• whether the person is a settlor, a trustee or a beneficiary
• full name
• National Insurance number or Unique Tax Reference (UTR)
• date of birth
• postal address (or passport or ID card details, if the address is not in the UK)
• You can use classes to identify beneficiaries, rather than naming them individually.

If the trust sells or buys assets during the year, you’ll need:

• completion statements for property transactions
• contract notes for stocks or shares
• receipts for sale or purchase expenses, including estate agent’s and solicitor’s charges on the sale of property and details of any Stamp Duty paid

If the trust owns property to let, you’ll need:

• receipts for expenses connected with the property, including any mortgage interest
• annual bills such as business or water rates
• licence or rent agreements showing the rent payable

If the trust has received additional assets you’ll need:

• the amount or value of the asset received (use the asset’s market value on the date it was moved into the trust)
• the date the additional money or asset was received
• details of who made the payment or who moved the asset into trust

You should also keep records that show any important decisions made by the trustees, such as:

• minutes of meetings
• deeds of appointment
• any decisions that affect the distribution of capital or income

Trusts may make payments to beneficiaries if they:

• can receive income at the trustees’ discretion
• are entitled to receive trust income under the terms of the trust

Trustees must keep records of any income payments made at their discretion to beneficiaries. This information is required as part of the Trust and Estate Tax Return for discretionary trusts.

The length of time you must keep written records after the trust has made the final payment to beneficiaries depends on whether the trust has any business income.

• If the trust has business income, you must keep the business records for 5 years after the filing deadline of 31 January. For example, if you submit a return for tax year 2008 to 2009 by 31 January 2010, you must keep the records until 31 January 2015.
• If the trust has no business income, you must keep the business records for one year after the filing deadline of 31 January. For example, if you submit a return for tax year 2008 to 2009 by 31 January 2010, you must keep your records until 31 January 2011.