Home Business TRUST REGISTRATION SERVICE EXPANSION COULD AFFECT THOUSANDS, WARNS EXPERT

TRUST REGISTRATION SERVICE EXPANSION COULD AFFECT THOUSANDS, WARNS EXPERT

by uma

THE TRUST Registration Service (TRS) was set up in 2017 as part of an anti-money laundering directive. Until relatively recently, the TRS only affected trusts with a UK tax liability. However, a recent change to the type of trusts that need registering now requires the attention of thousands more. Ben Taylor, associate solicitor at top 150 law firm Roythornes Solicitors, explains the expansion and what those concerned can do. 

“Recent changes to the Trust Registration Service have been difficult for experts to interpret, which realistically means that people with joint ownership arrangements and other trustees will find it very difficult to independently assess their situation. In a timely manner, the Law Society has published guidance that has helped practitioners gain clarity on the new legislation and it is our hope to bring attention to these changes to help ensure people don’t have a nasty surprise.

“Now that many more trusts are required to register, people are most likely to find themself facing the question of registration if they own property jointly where one person holds for themselves and another. So, for example, where a couple marry, the wife already owning a property gifts 50 per cent to her new partner, without updating the legal title. Of course, this is only an example, and the rules affect civil partnerships, cohabitees, and people not in relationships equally.

“In a marriage or civil partnership scenario, the gift itself would typically fall within the exemption for Capital Gains Tax and usually there will be no need to update the title at the Land Registry. Very often, such gifts are completed by a Declaration of Trust, whereby the person making the gift declares that they hold the property on trust for themself and for their partner in whatever proportions they decide. 

“It is now understood that such trusts, both new and existing, are required to register with the TRS. However, there are two exceptions. One is where the legal owners and the beneficial owners are the same, so if in the aforementioned example the legal title was updated so both individuals were registered as legal owner, that would be excluded from the requirement to register. 

“The second is where a statutory trust has arisen. In respect of that arrangement, only four people can be registered on the legal title to property, so a legal trust arises where property is owned by, say, five people.

“It will be important for people outside of the exceptions to consider the costs of registration, the ongoing administration requirements, and the possible access to the TRS by others involved with money laundering investigations, compared with the costs of registering new legal owners.

“In most cases, updating the Land Registry title to include all names will be the simpler, long-term option.

“Generally, for existing registrable trusts, registration is required by September 2022. For arrangements created after 4 June 2022, it is within 90 days of creation or meeting the criteria for registration. Failing to register may result in a penalty. 

“Where the lead trustee registers up to three months from the due date a £100 penalty is possible, moving up to a £200 penalty three-to-six months after the due date, before becoming a penalty of £300 or five per cent of the tax liability depending on whichever is the greater sum when registered more than six months late. 

“HMRC has historically been lenient with penalties, but people should not rely on this. 

“My advice for people with this sort of arrangement is to consider the issue of registration as early as possible, so that regardless of whether or not you wish to register your trust you have allowed adequate time to receive advice and support making the necessary changes.”  

 

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