The Trust Register was introduced in 2017 and at that time, no registration was required for those trusts which did not pay tax. New rules were introduced on 6 October 2020 as part of anti-money laundering and counter terrorism measures, which significantly extended the scope of the register. The deadline for registration is 1 September 2022, however the situation is complex and HMRC have only recently issued guidance on how the new rules will apply.
On the face of it, many practices and PCNs may unfortunately get impacted by the new rules. The underlying problem is that neither partnerships nor PCNs are legal entities which are capable of holding assets in their own name which forces them to hold assets in the names of nominees. In normal circumstances this nominee arrangement would be a ‘trust’ relationship, and therefore potentially subject to the new rules.
The three most obvious examples where trusts are commonly used by primary care medical practices are:
- GP Surgery premises where partners jointly own the freehold or long leasehold building(s):
- Shares held by a GP partnership in a GP Federation or PCN company
- PCN nominated bank accounts where a practice is holding funds on behalf of other PCN member practices
It is important to state that the position is still unclear and there is currently conflicting advice available. DR Solicitors are therefore contributing to the production of some national guidance for primary care, which we hope will be issued soon.
One of the reasons that the issue is receiving a great deal of publicity is that there are financial and criminal penalties for failing to register. However we would direct concerned practices to the website of the Institute of Chartered Accountants in England and Wales which contains some helpful information from HMRC on initial failure to Register or late registration:
In recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees, there will be no penalty for a first offence of failure to register or late registration of a trust. The exception is when that failure is shown to be due to deliberate behaviour on the part of the trustees. In that case, or where there are repeated failures, a £5,000 penalty may be charged per offence.
In practice, this means that, should HMRC become aware of a trust which has not been registered by the relevant deadline – either because that trust has been registered late or because HMRC has identified that trust’s existence by other means – HMRC may issue a warning letter to the trustee or agent. It would usually only charge a penalty if that letter were not acted on.
The website contains other relevant information and can be accessed at: https://www.icaew.com/insights/tax-news/2022/aug-2022/hmrc-updates-trs-manual-in-advance-of-1-september-deadline
We will be issuing more guidance on this subject very soon, so please stay subscribed to the blog.