There are any number of reasons why you might want to create a Trust, such as leaving money in your Will to transfer to your children when they reach a certain age or transferring your home to a Trust for the benefit of your children but reserving the right to live in it for a period (Family Protection Trust).
For some time now, most trusts must be registered with the HMRC when they are created. In 2017, the ‘Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations’ came into force and with them a far wider definition of what Trusts have to be registered with HMRC.
Express Trusts
The 2017 regulations created the concept of an ‘Express Trust’. An express Trust can be created by an individual that comes into effect when they are alive (for example, moving a house into a Family Protection Trust) or comes into effect through their Will on death. Express Trusts need to be registered, regardless of whether tax is payable or not.
1 September Registration Deadline Passes
The 2017 regulations requires that all existing and relevant Trusts are registered with HMRC, regardless of when they were created. All Trusts created after 1st September 2022 have to be registered within 90 days of creation.
Exceptions – Provisions in a Will
If a Trust is created in a Will but the estate is dealt with within two years of death, no HMRC registration is required UNLESS it is liable for tax. However, this is a hard timescale; if the administration goes beyond two years, it must be registered.
Leaving Money to Children
It is common if you have young children to leave money to pass to them when they reach a certain age, usually 18. Regardless of whether tax is due, any Trust when money is retained for a period of time requires to be registered. There are some specific provisions when leaving money to those aged between 18 and 25, but while you can postpone delivery of the money up to the age of 25, you still need to register the Trust.
Liferent Trust
If you and your spouse own a property, it is not uncommon for your Will to put your half share into a Trust for your children (or indeed any third party) with the provision that your spouse has a right to live in the property while they remain alive. Even although this would not usually mean tax is payable, it has to been registered as an Express Trust with the HMRC within two years of the death.
Family Protection Trust
It is also not uncommon for someone to transfer their house to their family while reserving their right to live there while they remain alive. In this case, the Trust needs to be registered within 90 days. [I think you covered this in “Express Trusts” above]
Registering Existing Trusts
We, like all lawyers, are currently going through our records to see if we can identify any existing trusts that were created before the new regulations. This will allow us, hopefully, to contact the Trustees to warn them of their obligation and assist with Trust registration. If this article has jogged your memory that you might have a Trust that requires attention, or would like to ask any other questions, please get in touch for a conversation.