Trust Registration

The 5TH Anti Money Laundering Directive (5MLD) becomes law in March 2020
It requires mandatory registration for Trustees of Express Trusts (i.e. those created intentionally).

Liability to:
Capital Gains Tax
Income Tax
Inheritance Tax
Scotland Land & Buildings Transaction Tax
Stamp Duty Land Tax
Stamp Duty Reserve or Stamp Duty

On first becoming liable for Capital Gains Tax or Income Tax – Trustees must register by the 5th October following the year in which the liability arises.

For other relevant taxes, register by the 31st January following the end of the tax year.

For existing trusts, registration requires updating annually.

However …

The Trust Register cannot currently be updated!
It is expected to be up and running by 31st March 2020 (!!!)

Continuing liability on Trust

The Trust Register needs to be updated annually by the 31st January following the year end
Trusts that only have a 10 year Anniversary charge need to register only every 10 years

Exceptions

Trusts owning Non-Income producing Assets
Unless Chargeable Event Gain on death of Settlor or exceeding 5% withdrawals
Register by the 5th October following the year end
NB – If the Chargeable Event Gain occurs whilst the Settlor is still alive and a UK Resident, the tax liability arises on the Settlor and would NOT require Trust Registration

Penalties

For non-compliance

Minimum £100 for 3 months delay

Up to £300 or 5% of the total tax liability

Registration requires a Governmental Gateway Account and a UTR

Consultations and views have been sought on 5MLD. The consultation closed on 10th June 2019.
NB – Consideration is being given to the need to register Bare Trusts

Proposed Registration Dates

Existing unregistered Trusts – 31/03/2021

New Trusts created after 1st April 2020 need to be registered within 30 days of creation

Non compliance

HMRC stats for 2016/17 suggest that of 141,000 Trust SARs there are only 85,000 Trusts registered

This is potentially a Lay Trustee oversight.

It is important that Trustees are aware of their obligations.

Example

On 05/05/2006, Mr. A gifts £285,000 Bond into a Discretionary Gift Trust
By 05/05/2016, the Bond value is £480,000
The Inheritance Tax Liability on the 10 Year Anniversary is
£480,000 – £325,000 (Nil Rate Band) = £155,000
x 6% = £9,300
As the funds are held in a Non-Income producing Asset, this has the potential to be overlooked
This would give rise to penalties for the late payment of Inheritance Tax and for late registration