HMRC have updated guidance on registering a client trust to clarify which types of trust must be registered and the deadlines for registering.
The online guidance – Register your client’s trust – explains how tax agents with client trusts with a tax liability can register online. The guidance has recently been updated to show the types of trust that must be registered and the deadlines for doing so.
The guidance refers to an ‘express trust’, which, broadly, is an arrangement where there is a clear and expressed intention to create a trust. It is usually created by a written document (a trust deed).
- An express trust must be registered whether the client is a UK resident or non-UK resident.
- A UK resident express trust must be registered where there is a tax liability for any of the relevant taxes for any trust income or assets.
- A non-UK resident express trust must be registered where there is a tax liability for any of the relevant taxes after the trust receives UK source income or has UK assets.
- Pension schemes set up as an express trust need not be registered if they are already registered under the Manage and Register Pension Schemes or Pension Schemes Online services.
Registration deadlines for each tax a trust might be liable to are as follows:
- New liability to capital gains tax or income tax – 5 October
- Existing liability to capital gains tax or income tax – 31 January
- New liability to inheritance tax with capital gains tax or income tax – 5 October
- Inheritance tax without capital gains tax or income tax – 31 January
- Land and buildings Transaction Tax (in Scotland) – 31 January
- Stamp Duty Land Tax – 31 January
- Stamp Duty Reserve Tax or Stamp Duty – 31 January
A trust has a new tax liability for income tax in 2018/19 must be registered by 5 October 2019.
A trust has a tax liability for Stamp Duty Land Tax in 2018/19 must be registered by 31 January 2020.
The lead trustee may have to pay a penalty if they do not register the trust before the registration deadline.
If they do not register or update the information, and cannot show HMRC that they took reasonable steps to do so, the penalties are:
- £100 for registering up to 3 months after the deadline
- £200 for registering between 3 to 6 months after the deadline
- £300 or 5% of the total tax liability in the relevant year (whichever is higher) for registering more than 6 months after the deadline
Penalties will not be issued automatically and will be reviewed on a case by case basis.
HMRC will also take into account that tax year 2017/18 is the first year that trustees and agents have had to meet the new registration obligations.