Trust Registration Service - Rules extension and deadline
Changes in trust registration requirements - act now!
Did you know that you have until September 1st 2022 to register a trust with the Government’s Trust registration Service (TRS), even if you previously didn’t have to?
Until recently, only thrusts that had a UK tax liability, had to register. This included off-shore trusts, but where they still had a UK tax liability. Now, all Express Trusts need to be registered.
Recent changes in Trust Registration Requirements
The new requirements to register a trust were introduced in 2020. Those trusts created on or before October 6 2020, have until September 1 2022 to register or be faced with a fixed penalty fine of £100 or up to 5% of any tax due (or £300, whichever is greater).
Trusts created after this date must be registered within 90 days of creation.
It is estimated that because of this change, there may be around one million trusts in the UK that are still to be registered before the September 1st deadline.
What trusts now need to be registered?
The Government instructs that the the following types of trust now need to register:
- All UK express trusts — unless they are specifically excluded
- Non-UK express trusts, like trusts that:
- acquire land or property in the UK
- have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK
By way of example, trusts that now require registration include those where:
1. A trust holds an offshore or onshore investment that was set up by a financial advisor. Most commonly these include:
- discounted gift trusts
- loan trusts
- gift and loan trusts
2. Property is held and a beneficiary exists but where there was no taxable income or capital gains and therefore no need, up to now, to register with HMRC.
3. Trusts that hold shares in a private company. This includes:
- a trading company,
- a family investment company (FIC)
- a personal investment company (PIC)
4. Any other trusts that hold other assets where a tax liability has not arisen.
Trusts that do not have to be registered.
While the extension of the TRS requirements covers many trusts that previously didn’t have to register, there are a number that remain exempt. A full list of exemptions can be found on the Government’s ‘register a trust page’ here. Remember, that this only applies if the trust is not liable to UK taxes.
How TaxAgility can help
While you can do this yourself through your own Government Gateway account, it’s really important that you get it right the first time. Mistakes in any reporting to HMRC can be very costly. This is why TaxAgility offers a simple service to ensure your Trust is reported correctly. First, we will make sure your trust isn’t exempt. Then we will ensure the correct information is reported through the TPS service and that it is up to date - another requirement, even if you have previously registered your trust.
Contact TaxAgility today on 020 8108 0090 and enlist our assistance in registering your Trust - time is running out.
Inheritance Tax (IHT) Guide to Completing Forms
When you’re acting as a personal representative for the estate of a deceased person (often a spouse, parent, or older relative) you can save yourself a lot of time by using this short guide that explains what forms you’ll need to complete, depending on your unique situation.
In this capacity you’ll be known as the executor if you’re working with a valid Will, or an administrator if the deceased person had no Will, or their Will is deemed invalid.
Grant of Representation
The Grant of Representation is a certificate with the names of the personal representative(s) of the case, along with a document that you, as a personal representative, are using as evidence of your entitlement to act as the executor/administrator of the deceased person’s estate.
Which Inheritance Tax (IHT) Forms?
The number of forms you’ll have to fill in as the estate’s executor/administrator will depend entirely on whether or not there is IHT to pay and, if no IHT is due, how easily you can prove this.
Forms IHT205 and IHT217
If there is no IHT to pay you only need to fill in form IHT205. There’s no IHT due if the value of the estate is below the £325,000 (2016-17) threshold, or if its full value if left to a charity or a community amateur sports club.
If the individual who died had a spouse or civil partner who didn’t use any or part of their IHT threshold, you can transfer up to 100% of it, thus making it possible for an estate worth up to £650,000 (2016-17) to be IHT exempt. In this situation you’ll need to complete form IHT217 alongside IHT205, and send it in with any supporting evidence.
Form IHT400
If there is IHT to pay you need to fill in form IHT400, along with a number of supplementary pages (forms IHT401-430) depending on the details of the deceased person’s estate. These supplementary forms can all be found on this page (scroll down until you reach the ‘supplementary pages’ heading).
In certain cases estates with no IHT to pay will be required to fill in form IHT400, along with a number of supplementary pages, if certain conditions can’t be met within form IHT205. If you believe the estate you’re a personal representative of owes no IHT, we strongly recommend you read form IHT205 all the way through before you begin filling it in.
Regardless of what forms you’re sending in, they must be received by HM Revenue and Customs (HMRC) “within a year of the end of the month the person died,” or you risk receiving a penalty.
Experienced Inheritance Tax Accountants
To speak with a professional accountant to discuss which inheritance tax forms you need to complete if you’re a personal representative of an estate, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
New £500,000 Inheritance Tax Threshold from 2017
Chancellor of the Exchequer George Osborne announced during the emergency (summer) Budget earlier this month that the current Inheritance Tax threshold is set to increase from 2017, adding an extra £175,000 allowance per-person on homes left to children or grandchildren.
This figure will be added to the current tax-free threshold of £325,000, for a total per-person, tax-free allowance of £500,000. As both allowances are transferable between your spouse or partner (should you die before your spouse or partner, they will receive your allowance on top of their own), if you choose to pass your home down to your children or grandchildren from 2017 you’ll be able to pass on up to £1 million free from Inheritance Tax.
Speaking at the House of Commons on 8 July, Mr. Osborne said:
“The wish to pass something on to your children is about the most basic, human and natural aspiration there is. Inheritance tax was designed to be paid by the very rich. Yet today there are more families pulled into the inheritance tax net than ever before – and the number is set to double over the next five years. It’s not fair and we will act.”
Tax Rate to Remain
Under the new rules, estates valued between £1-2 million will pay tax at 40 percent over the £1 million mark, or the £500,000 mark for single parents or grandparents if their spouse or partner used their allowance previously, or didn’t pass their unused allowance on to them.
It should be noted that the new £500,000 per-person threshold will ‘taper’ away for estates worth more than £2 million. With that said, should you choose to downsize your home you won’t lose your tax-free allowance from your previous property.
Current Inheritance Tax System
Under the current system, individuals receive a tax-free threshold of £325,000, with spouses and partners being able to combine their allowances. The only difference between the current system and the new one, due to be phased in in 2017, is the new system adds an extra £175,000 allowance per person, thus increasing it to £500,000.
The original £325,000 threshold is fixed until the end of the 2020-21 tax year, after which there is potential for its renegotiation.
In its current form, Britain has some of the strictest Inheritance Tax rates in the developed world, with The Telegraph reporting that a parent splitting their £1 million estate (£800,000 property, £200,000 cash) between two children currently results in a £270,000 tax bill. Under the new system, this bill will reduce to £200,000 in the same scenario, making it lower than the Inheritance Tax paid on an equivalent inheritance in both France and Japan.
More Information on Inheritance Tax Threshold
To speak with a professional accountant to discuss what the new Inheritance Tax threshold means for you, your property, and those you wish to inherit it, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.
Inheritance Tax Numbers Expected to Double
There is expected to be a sharp rise in the number of estates affected by the controversial inheritance tax (IHT).
Experts have warned that the number of estates expected to be caught by inheritance tax is likely to double by 2016/17 – from 21,000 in 2012, to an expected 42,000 in 2017.
Read more
Estate planning, wills and trusts
Estate Planning in 2024: Wills, Trusts, and Powers of Attorney
As accountants, TaxAgility understand that discussing death is never easy, but preparing for it through careful estate planning can alleviate many of the financial and legal burdens that arise. Our goal is to ensure that you have the right information from a tax and estate planning perspective to help ensure your legacy is preserved and that your property and assets, both personal and business, are passed on according to your wishes.
Wills
A will is a fundamental legal document that outlines your instructions on how the assets in your estate should be distributed after your death. It also designates guardians for any minor children you may have. For those of you who own a business, a will is crucial in ensuring a smooth transition and continuity of operations.
Why You Need a Will:
- Young Children: Naming guardians in your will ensures that your children are cared for by individuals you trust. Without a will, social services may place your children into foster care while the court appoints a guardian, which can be a lengthy and stressful process for your children. For example, if both parents of a young child pass away unexpectedly without a will, the child could be placed in foster care temporarily until a guardian is appointed by the court.
- Unmarried Couples: Without a will, your partner may not be entitled to any part of your estate. If you own a house jointly and die without a will, your partner might not automatically inherit your share, potentially forcing them to sell the property. Additionally, your children may not automatically go to your surviving partner, potentially leading to them being placed in social services.
- Separated Couples: If you die without updating your will, your estate may go to an ex-spouse, bypassing the individuals you intended to benefit. For example, a man who separated from his wife but did not update his will could inadvertently leave his entire estate to her, excluding his new partner and children from inheritance.
- Business Owners: A will can specify who will take over your business, ensuring it continues to operate smoothly. For instance, you can name a trusted colleague or family member to manage or inherit the business, preventing disputes and disruptions.
The Complications of Dying Without a Will (Intestate):
Dying without a will, known as dying intestate, can lead to significant complications for your loved ones during a time when they are most in need of help and are most vulnerable. Here’s what really happens:
- Legal Uncertainty: Without a will, the distribution of your assets is determined by the laws of intestacy. This can mean that your estate may not be distributed according to your wishes. For example, your spouse might receive only a portion of your estate, with the remainder divided among your children, which can lead to financial difficulties for your surviving spouse.
- Family Disputes: Intestacy can cause conflicts among family members, as there might be disagreements about who should inherit what. This can lead to long-lasting rifts in the family. For instance, siblings might argue over the family home or valuable heirlooms, causing emotional stress and division.
- Delay in Asset Distribution: The process of administering an intestate estate is often slower and more complex than if a will were in place. This can result in delays in accessing funds needed for daily living expenses, funeral costs, or paying off debts. For example, if a primary breadwinner dies without a will, their family may face financial hardship as they wait for the estate to be settled.
- Guardianship Issues: If you have minor children and no will, the court will decide who will become their guardian. This can be a prolonged and distressing process, leaving your children in a state of uncertainty and potential foster care. For example, children may be placed with a family member they are not close to, or worse, with someone they don't know well.
- Higher Costs: Administering an intestate estate can be more expensive due to the need for legal intervention, court fees, and potential disputes that require resolution. These costs can reduce the overall value of the estate, leaving less for your beneficiaries. For instance, legal fees from contesting the estate can significantly diminish the inheritance your loved ones receive.
- Business Continuity: Without clear instructions, the future of your business could be jeopardized. Disputes among potential heirs or a lack of immediate leadership can lead to operational disruptions, loss of clients, or even the business's closure.
If you already have a will, review it regularly to ensure it reflects your current wishes and circumstances, particularly if there have been significant changes in your personal life or business.
Lasting Power of Attorney (LPA)
The loss of your decision-making ability due to physical or mental incapacitation can be just as challenging for your loved ones as your death. A Lasting Power of Attorney allows you to nominate a trusted individual to make decisions on your behalf if you become incapacitated.
Without an LPA, an application must be made to the Court of Protection, which can be time-consuming and may leave your affairs in the hands of social services temporarily. For example, if someone suffers a severe stroke and loses the ability to communicate or make decisions, their family would need to apply to the Court of Protection to manage their finances and health care decisions, potentially causing delays and stress during an already difficult time.
Trusts
A trust is a legal arrangement that allows you to split the ownership of an asset into two parts:
- Legal Ownership: Held by the trustee.
- Beneficial Ownership: Held by the beneficiary.
Trusts offer flexibility in protecting your assets after death and can be particularly useful in the following scenarios:
- Young Children: Trusts ensure that any money left to young children is managed wisely until they reach a specified age. For instance, a trust can be set up to release funds to a child at 18 for educational expenses and then at 25 for other needs.
- Spouses: Trusts can protect your assets if your surviving spouse remarries and later divorces, ensuring that your children’s inheritance is safeguarded. For example, a husband leaves his estate in a trust for his wife’s lifetime benefit, but ensures that the remaining assets will pass to their children after her death, protecting the estate from claims by a new spouse.
- Inheritance Tax: Trusts can help protect your assets from inheritance tax. As of 2024, the inheritance tax threshold (Nil Rate Band) remains at £325,000, with a tax rate of 40% on assets above this threshold. For example, placing assets in a trust can help reduce the taxable estate and provide tax-efficient benefits to beneficiaries.
- Care Costs: Trusts can protect your property and assets from being depleted by the high costs of long-term care. For instance, a family home placed in a trust can be protected from being sold to cover care home fees, ensuring it remains available for future generations.
- Business Assets: Trusts can ensure your business continues to operate smoothly and benefits the intended heirs. For instance, you can set up a trust to manage business assets, appointing a trustee to run the business until your children are ready to take over.
Contact Us
If you have any concerns about your estate planning or protecting your assets, both personal and business, for the benefit of those you leave behind, please feel free to call TaxAgility on 02087802349. Let’s work together to ensure that your legacy is secured and your loved ones are cared for.
This article provides a general overview and should not replace professional advice tailored to your specific circumstances.