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An at a glance guide to UK trusts and the trust registration service (TRS). Subscribers see here for UK trusts and here for Non-resident trusts.

At a glance

What's new?

HMRC has published a new consultation ‘The Taxation of Trusts: A Review’ considering whether the current system for taxing trusts meets the principles of transparency, fairness, fiscal neutrality, and simplicity. No reforms have been suggested; the government has said it will consider the views and evidence presented and weigh up the options for targeted reforms accordingly.

5MLD

The trusts register is expected to be expanded as part of the UK's compliance with the EU Fifth Money Laundering Directive (5MLD) from March 2020; this would require certain types of trust to report to HMRC through the TRS, whether they have UK tax liabilities or not:

At a glance

Most trusts set up after 2006 are relevant property trusts subject to potential IHT charges (“the relevant property regime”):

Special trusts for disabled persons, bereaved children and those between the ages of 18 and 25 are not under the relevant property regime

Discretionary trust (DT)

A discretionary trust will have a wide class of beneficiaries, generally unnamed and can include unborn children.

Interest in possession or life interest (IIP)

Where there is an interest in possession, or life interest:

Bare Trusts

These are informal types of trust. The income and capital of a bare trust belongs to the beneficiary; as trustee you have control but if the beneficiary asks for the assets to be transferred to them it is hard for you to refuse.

Trust residency 

A UK trust is one which:

Inheritance tax (IHT)

Excluded Property:

Ten year charges

Exit charges

When assets leave the trust, e.g. when distributions are made to beneficiaries, an exit charge is due:

If you are a trustee, you and the other trustees have responsibility for paying the tax on an exit; you can delegate this responsibility to the beneficiary if you wish.

IHT Reporting requirements

Trustees are required to submit forms IHT100 even if there is no tax due, unless certain conditions are met.

Income tax

If you are a UK resident beneficiary with an interest in possession:

If you are the settlor and you have retained an interest in the trust:

Capital gains tax (CGT)

As a trustee you can claim certain CGT reliefs on trust gains, subject to certain conditions:

Holdover relief is important:

Reporting requirements for income tax and capital gains tax

As a trustee you are required to file self-assessment returns for the trust in respect of income and capital gains.

Stamp Duty Land Tax (SDLT)

A transfer into trust is a gift with no consideration; property can be put into or taken out of a trust with no SDLT charge unless the trustees/beneficiaries take on any borrowing attached to the property.

Links to our useful guides:

UK trusts
Non-resident trusts
Trusts & Estates: Ten-year charge reporting requirements 

Trust Registration service

From July 2017 trusts with UK tax liabilities must be registered with HMRC under an Online registration system.