Don’t Be Caught Out by New Trust Registration Requirements

Could your farm or rural business have a Trust you don’t know about?

The government has introduced new legislation which requires most Trusts to be registered with the HMRC. 

As agricultural land, assets and rural businesses are often passed down generations; it is possible that your farming business has one or several Trusts which now require registration. The deadline for registration of 1 September 2022 is fast approaching, and action should be taken to ensure penalties are avoided.

The new rules

All UK “express” trusts (with certain limited exceptions) and some non-UK express trusts that were in existence on or created after 6 October 2020 must register online with HMRC’s Trust Registration Service (“TRS”). This includes Trusts which have since ended.

Previously, many farming Trusts may have avoided the need to register as they did not have a UK tax liability. However, the new rules capture both taxable and non-taxable Trusts, and it is important to consider how the new rules could affect you, particularly as many farming and rural businesses are unaware a Trust is in existence.

Could I have a Trust I don’t know about?

Agricultural land and assets often remain in families for generations. A Trust could have been set up many years ago to pass assets down to descendants in a more tax-efficient manner, meaning you could have a long-standing family farming trust that now requires registration.

Not all Trusts are created by taking active steps to sign a Trust Deed, and many are less obvious, for example:

• A family member leaves a gift to a minor in their Will. The gift is held on Trust for the minor and usually requires registration.
• One family member is named as the owner of land with the Land Registry, but multiple family members actually own the land. The legally recorded owner holds the land on Trust for the other beneficial owners. This creates a Trust which requires registration.
• One family member is named as the holder of a bank account which actually holds joint funds. The legally stated owner holds the monies on Trust for the other joint owners. This creates a Trust, which usually requires registration.
• A family member dies, and their estate is not administered within two years. This could create a Trust which requires registering.
• A parent holds assets in their name on behalf of a minor. The parent holds the asset on bare Trust for the minor, which could require registration.

If you think you may have a Trust, you should take professional advice to obtain clarity and confirmation of Trust compliance requirements.

Registration deadline

Non-taxable trusts must be registered with the Trust Registration Service by 1 September 2022, or 90 days from the date the Trust is created. A registerable trust that has existed at any time on or after 6 October 2020 must be registered with the TRS, even if it was closed before the service was fully opened on 1 September 2021.

If the Trust is taxable, the registration deadline depends on various factors, so please get in touch with our specialist Trusts team, who can advise you further.

Failure to register

Financial penalties for not registering Trusts and not updating HMRC are potentially payable. HMRC will assess these on a case-by-case basis. As many farming families and businesses contain multiple Trusts, there could be multiple penalties for failing to respond to the fast-approaching deadline. Once the deadline passes, the quicker the Trust is registered, the more lenient HMRC are likely to be.

Here to help

If your family farm or business contains a Trust, you must consider whether your Trust needs to be registered and should take immediate steps ahead of the upcoming registration deadline. 

If you want to discuss how changes in trust compliance might impact your Trust, then do not hesitate to contact our Specialist Trusts Solicitors below.