HMRC’s Trust Register is now a part of day-to-day life and if you are not already aware of it, you probably should be. The Register was set up to help prevent the use of Trusts as a vehicle for Money Laundering. In basic terms, the Register holds details of the people who are responsible for looking after the Trust (“the Trustees”), the person who created the Trust (“the Settlor”) and the people who can benefit from it (“the Beneficiaries”). The Register may also require information about the assets held in Trust. Most existing express Trusts should now be registered with HMRC and any new express Trusts should be registered within 90 days of creation.
If you are a practitioner engaging with a Trust for business purposes, HMRC has now issued further guidance about how the Trust Register should be checked. Relevant parties (which includes credit/financial institutions, auditors, accountants, tax advisers, legal professionals, estate agents, letting agents and more) are required to:-
The above steps should be taken on engaging the client in work as part of the usual due diligence checks.
What’s a material discrepancy on the Register which requires reporting? Well, if a Trust is not registered, there is key information missing from the Register, or it does not contain all the beneficiary details, then those discrepancies would be reportable. In addition, if there is incorrect information on the Register making it impossible to contact or identify a beneficiary (for instance, if their address or date of birth is incorrect), that would also be reportable. Minor errors such as spelling mistakes or common abbreviations such as St. instead of Street are not reportable.
Whilst HMRC have now confirmed that the maximum penalty for failing to register a Trust with HMRC’s Trust Register will be £5,000, they are still showing a degree of understanding on registrations. In their current guidance, HMRC have suggested that if a material discrepancy is discovered, the first step of a Relevant Party should be to attempt to resolve the discrepancy.
So, if a Trust was unregistered the Relevant Party is required to make the Trustees aware of the registration requirement. HMRC have then provided that the Trustees are given a reasonable amount of time to rectify the discrepancy – 30 days being the suggested period. If the discrepancy is not rectified within a reasonable time frame then the Relevant Party is required to report the material discrepancy to HMRC as soon as practical.
The use of Trusts in the British Legal System is historic and there are thousands of them particularly in relation to certain kinds of property ownership. It has been unexpected how wide the net has been cast in terms of Trust registrations and it is important that professionals as well as individuals are aware of their new obligations and when the need to register a Trust might arise.
If you would like any help or training in connection to the Trust Registration Service please contact our Private Client Team on 0191 232 8345 or fill out our contact form.