The crusade to register trusts
If you are a trustee – are you ready for the changes?
A short history into trusts
Here’s something I bet you didn’t know – the earliest trusts date back to the Crusades.
Back in the 12th century, it was very much in vogue for knights and nobles to head abroad and get involved in the latest holy war. The only problem was that, as landowners, they needed someone to manage their estates in their absence – and collect and pay the all-important feudal dues.
To solve the problem, these warriors would convey ownership of their lands to someone else while they were away, on the understanding that ownership would be conveyed back on their return.
This would have been fine, but legally speaking the other person had no legal obligation to hand back the land. This led to growing numbers of angry crusaders petitioning the king, who would then ask his Lord Chancellor to adjudicate. Over time, the Court of Chancery consistently recognised the claims of any returning crusader – who became known as the ‘beneficiary’, while the person managing the land was dubbed the ‘trustee’. In this way, the first trusts were born in English law.
Modern day trusts
Fast-forward 900 years or so and trusts are still going strong. They have plenty of legitimate uses, such as for managing pension plans, safeguarding assets for children and so on. Unfortunately, trusts have also developed a slightly shady reputation as ways of avoiding tax and shifting dodgy money from one jurisdiction to another.
New regulations surrounding trusts
To counter this, new EU Money Laundering regulations require trustees to keep specific data about all people with a beneficial interest in them, whether they are a settlor (person putting assets into a trust), a beneficiary or a trustee.
To comply, trusts with a UK income source or UK assets and which have ‘tax consequences’ must be registered with HMRC’s Trusts Registration Service (TRS). ‘Tax consequences’ mean trustees are liable for one or more of: Income Tax; Capital Gains Tax; Inheritance Tax; Stamp Duty Land Tax; Land and Buildings Transaction Tax and Stamp Duty Reserve Tax.
So, if you are a trustee of a trust, when do you need to register? If the trust has tax consequence for the 2016-17 financial year you will need to report this to the TRS by 31 January 2018. The data must then be updated each year as necessary.
Secure professional advice about wills, trusts and legacy planning
However, as always with tax legislation, there are exemptions and different rules that may apply to your trust. So, even though trusts are very different from the days of the Crusades, do talk to one of THP’s accountants today to make sure your trust is properly prepared for the upcoming changes. Learn more about our service on wills, trusts and legacy planning.