Trust reporting requirements have changed, potentially leaving many trustees who don’t keep abreast of the legislation at risk of financial penalties from HMRC, as Nichola Barnes explains…
My husband died recently, leaving his half of our joint property in trust for our children. Is there anything I need to do to register its creation?
There are many different ways trusts can be created, both during a person’s lifetime or on death, via a will.
It used to be the case that if the trust did not generate a tax liability, it did not have to be registered with HMRC, but this rule has changed. Now, the majority of trusts, irrespective of their tax situation, have to be formally recorded with the Inland Revenue. The deadline for registering existing trusts has just been extended to September 1.
HMRC should be informed of new trusts, like the one your husband’s will created, within 90 days of formation. Trustees also have 90 days to update the registration, if circumstances surrounding the trust change.
It is very common for married couples to create trusts in their wills to cover 50% of their joint property, as a way to ringfence part of the asset from the clutches of care home fees. However, many trustees act in a non-professional capacity and are unlikely to be aware they are now required by law to register trusts of this kind, even though there is no tax to pay.
To lodge a trust with HMRC, you need to provide some basic information about who is involved. For example, details of trustees, the beneficiaries and the person who created the trust will be required. The register must also be updated if these details change at any time.
If you are unsure about your reporting obligations as a trustee, it is important to obtain specialist professional advice. Failing to comply could result in financial penalties from HMRC, so if you are in any doubt, always seek assistance.
To find out more about creating and managing a trust, why not book a free 30-minute consultation with one of our probate specialists? Telephone (0114) 218 4000, email: info@tayloremmet.co.uk
