Private trustees – so called ‘mum and dad’ trustees – are being warned to register with HMRC ahead of rules changes set to take effect on 1 September this year.

The ruling affects all trusts, but concerns are rising that those created by families, for a myriad of reasons, could be more likely to fall foul of the new rules.

While exact figures are difficult to obtain, around one million trusts are thought to be required to register.

The changes are being implemented by the Government in order to fight money laundering.

What are trusts?

Trusts are a legal structure designed to remove an individual or organisation from ownership of specific assets.

When it comes to private trusts, typically these are created by parents or grandparents to hold assets such as stocks for children or grandchildren who are, not as of yet, able to make their own financial decisions.

Trusts are also commonly used as a part of estate and inheritance planning, combined with life assurance policies. They can be used to provide financially for children or vulnerable adults, pay school fees or protect assets against divorce or bankruptcy.

I am a trustee – what do I need to do?

While the legitimacy and status of these trusts is not at risk, HMRC now wants all trustees to register their trusts with the tax collector by 1 September. All trustees are responsible for signing up to the register.

Trustees can register their trusts on the Government website. While HMRC says there will not be any financial penalties for not registering at this stage, it says trustees will begin to receive official requests to register if not done by 1 September.

There are exclusions for some trusts from these rules, however. This includes trusts for pensions, bank accounts held on behalf of minors, non-taxable charitable trusts and life insurance trusts that only pay out due to death, serious illness or disability.

Trusts which hold investments for minors are not exempt, however.

The process itself runs to around 100 pages of administration to register depending on the trust.  Information required includes details about trustees, beneficiaries and settlors. This includes basic information such as passport details, addresses and National Insurance numbers.

Registering a trust can however be tricky, especially for those not well-versed with the process and rules.

Particular problems arise where for instance a trust has been in existence since 6 October 2020, when the new registration regime began, but has already been wound up. Although such a trust no longer ‘exists,’ HMRC still requires the former trustees to register.

Broadly speaking then it is a good idea to speak to professional financial, tax or legal advisers for help, especially if the trustee is unclear on any aspect of the process.

It is essential to register as soon as possible, especially in consideration of financial advice. Unregistered trusts will be barred from receiving financial advice, tax planning, legal advice or accountancy help from the date of the deadline.

If you have a trust you would like to discuss, or for any other issues or concerns raised in this article, don’t hesitate to get in touch.