Securing the financial future of grandchildren or children by setting up a trust is a wise decision. But did you know that even non-taxable trusts now need to be registered with HMRC?
Since 2017, any tax-paying trusts had to be registered with HMRC through the online Trust Registration Service (TRS). But things have changed.
On 1st September 2022, an extension to this rule came into play – most existing non-taxable trusts needed to be registered on the TRS by this date. What’s more, any new trusts need to be registered within 90 days of being created.
Don’t panic if you haven’t yet registered your trust
It’s a straight-forward process to register trusts online, so I’d recommend your Lead Trustee does it as soon as possible. Simply go to HMRC’s website and you’ll find everything you need to know.
Let’s consider a couple of scenarios
As a parent or grandparent, you may have arranged a trust to invest money for your children or grandchildren. As the money is being invested for growth, it’s unlikely that the trust would be paying any tax. Before September 2022, you didn’t need to register the trust, but now you do.
Alternatively, you may be a trustee of a family trust. Or perhaps you have parents or grandparents that have established trusts to reduce the Inheritance Tax on their estates. In the past, these trusts didn’t need to be registered. That’s because the underlying investments were likely to be in non-income producing assets, such as income bonds, so there was no tax payable. However, since the rule change, these trusts must be registered.
Three things that could happen if you don’t register a trust
1) You could get a hefty fine from HMRC.
2) Withdrawing capital or income could be restricted
3) Making additional contributions to the trust could also be delayed
A few important points to remember
While a Lead Trustee is responsible for completing the TRS registration, and updating it, HMRC sees all Trustees as equally responsible. So it’s in every trustee’s best interests to ensure the trust registration is completed and kept up to date.
Finally, any changes to a Trust, such as a change to the Trustees or Beneficiaries or a change of their addresses must be updated within 90 days.
Note: HMRC provides a full list of Trusts that are excluded from registration at the following link: https://www.gov.uk/guidance/register-a-trust-as-a-trustee
By Steven Lea, Chartered Financial Planner at Meta Advisors, a St. James’s Place Partner Practice
