There are new rules that came into force on 6 October 2020, requiring blanket disclosure of all UK trusts including full details of their ownership on the UK Trust Registration Service (TRS).
The TRS was introduced in June 2017 as part of the UK’s implementation of the Fourth Money Laundering Directive (4MLD) – the previous TRS regime. As part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), further rules introduced on 6 October 2020 extended the scope of the trust register to all UK and some non-UK trusts that are currently open, whether or not the trust has to pay any tax, but with some specific exclusions – the new TRS regime.
All trusts within the scope of this legislation need to comply with the requirements. The TRS register opened for the registration of non-taxable trusts on 1 September 2021.
The trustees of certain types of trust have to register beneficial ownership information about the trust on TRS – including information about the settlors, trustees, protector(s) (if any), beneficiaries and any other natural person exercising effective control of the trust. The register is private but the information is shared with law enforcement agencies.
This means that a great number of trusts which did not have to register previously, will now have to register via TRS. This communication intends to provide an overview of the changes to the requirements as a result of 5MLD in respect of the TRS registration.
TRS registration/ timescales
Taxable trusts
Broadly, a taxable trust is a trust that has incurred a liability to any of the following in a tax year:
- Income Tax;
- Capital Gains Tax;
- Inheritance Tax;
- Stamp Duty Land Tax; and
- Stamp Duty Reserve Tax and (in Scotland) Land and Buildings Transaction Tax.
Under, the previous TRS regime, only these trusts were required to register under the TRS.
The existing deadlines are still applicable for the registration of taxable trusts under the new TRS regime. These being as follows:
- Taxable trusts already registered for Self-Assessment – the deadline is 31 January after the end of that tax year.
- Taxable trusts not registered for Self-Assessment – the registration deadline is 5 October after the end of that tax year, in order to give enough time to issue the tax reference.
Non-taxable trusts
Broadly, a non-taxable trust is a trust that is not a taxable trust.
Under, the previous TRS regime, only taxable trusts were required to register under the TRS.
Under the new TRS regime, non-taxable trusts are now required to register under the TRS. The deadlines being as follows:
- Non-taxable trusts (these would not have previously had to register) in existence on or after 6 October 2020 must be registered by 1 September 2022 – this is even the case if the trust is wound-up prior to 1 September 2022;
- Non-taxable trusts created after 3 June 2022 must be registered within 90 days;
- Changes to the trust details or circumstances must be registered within 90 days of the change.
Trusts that need to be registered
Trusts that need to be registered fall into 3 broad categories:
- All UK express trusts – unless they are specifically excluded (see below: Trusts that do not need to be registered).
- Non-UK express trusts:
- with at least one UK resident trustee, and the trustees enter into a ‘business relationship’ with an ‘obliged entity’. An ‘obliged entity’ could be a financial institution, an adviser, an accountant etc;
- where the trustees acquire land or property in the UK.
- Non-express trusts and specifically excluded express trusts which have a tax liability
If the trust needs a Unique Taxpayer Reference (UTR) for Self-Assessment purposes, it must still register via TRS to get this, even if it’s highlighted in the exclusion list.
The legal responsibility for registration lies with the trustees. Where there are multiple trustees, it is a matter for the trustees to decide and appoint a ‘lead trustee’ to complete the registration process. All trustees are equally legally responsible for the trust, and therefore the nominated ‘lead’ trustee is simply the main point of contact for HMRC.
Trusts that do not need to be registered
Certain trusts do not need to register unless they are liable to pay UK tax. The broad rationale for the exclusions below is that these excluded trusts are often set up for a very limited purpose and are very unlikely to be used for money laundering or terrorist financing activity because they are highly regulated or are registered elsewhere.
Broadly, these include:
- Trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or under the Criminal Injuries Compensation Scheme;
- Trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within 2 years of the death (i.e. there is an exemption from having to register for 2 years from the date of the death);
- Will trusts which are created by a person’s will and come into effect on their death, providing they only hold the estate assets for up to 2 years after the person’s death (i.e. there is an exemption from having to register for 2 years from the date of the death);
- Trusts used to hold life or retirement policies where the life assured is still alive, providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured;
- Trust created under the intestacy rules, other legislation or Court Order i.e. trust not actively created by a settlor;
- Employee share scheme trusts;
- Co-ownership trusts set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as ‘tenants in common’;
- Charitable trusts which are registered as a charity in the UK or which are not required to register as a charity (the latter typically includes: exempt charities; excepted charities and charities with annual income of less than £5,000);
- Trusts required in order to open a bank account for a minor or vulnerable person;
- Child Trust Funds (tax-free saving account for children) and other financial products or arrangements that are described as trusts, but are not trusts.
- Trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme;
- Trusts where a disabled person is the beneficiary;
- ‘Pilot’ trusts which were set up before 6 October 2020 and which hold no more than £100 – pilot trusts set up after 6 October 2020 do not fall within this exemption and therefore will need to register
- ‘Financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets;
- Trusts set up for approved maintenance funds for historic buildings.
Please note that there is no specific exclusion for bare trusts, but that many bare trusts may fall within one of the above exclusions.
What to do if I need help – Appointing an Agent
The trustees can appoint an agent to complete the registration process if they wish.
RRL LLP has assisted with trust registrations and updates to the register for multiple trusts since the inception of the TRS, and proactively advised trusts as to their TRS compliance requirements. If you are affected by the above change and require our assistance with the initial registration and help with the annual requirement to update the TRS register, please do not hesitate to contact us.
Digitally excluded trustees
Some trustees may not be able to use the online system to appoint an agent (termed an “digitally excluded trustee” – one who, for reasons of age, disability, remoteness of location, religion or other valid reason is unable to engage with HMRC’s online digital services). If you think that you fall in this category, you should call the Trust Helpline 0300 123 1072. The advisers on the helpline will then be able to refer you to HMRC’s Extra Support Team if appropriate.
Please contact us if you wish for RRL to help you with the trust registration. We will then provide you with additional details of our service and associated fees.