Introduced as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), the requirement for trust registration to non-taxable UK trusts and some non-UK trusts has been extended by HM Revenue & Customs (HMRC). The objective is to give greater transparency to the ownership of trust assets and will affect you if you’re a trustee, or you administer or benefit from a trust.
You should now register all UK trusts and some non-UK trusts on HMRC’s Trust Registration Service (TRS), unless the trust is specifically excluded due to its characteristics. Failure to register can result in a penalty.
What trusts should be registered?
All UK express trusts, whenever established, provided they were in existence on or after October 6, 2020
Non-UK express trusts that acquire an interest in land in the UK on or after October 6, 2020
Non-UK express trusts that have at least one trustee resident in the UK and which enter into a business relationship on or after October 6, 2020 with a relevant person in the UK
HMRC has stated that an express trust is one that has been deliberately created by a settlor using a written document such as a Deed or Declaration of Trust and trusts set up in wills which have come into being following the death of the testator (the person who signed the will).
Key examples include:
Trusts for jointly held property where the beneficial title differs from the legal title e.g. the owners are holding the property for the benefit of others who are not on the legal title
Complex estates – those with substantial CGT or income tax liabilities
Nil rate band trusts holding property interest or debt
Will trusts exceeding two years post death
Lifetime trusts – if holding £100+ or set up after October 6, 2020
Some simple trusts – where cash is held for the benefit of another
Which trusts are exempt?
The following is not an exhaustive list but sets out some of the exclusions – unless liable to UK tax:
- Trusts imposed by statute such as on intestacy or bankruptcy
- Trusts created by court orders such as on divorce or following a dispute
- Co-ownership trusts where the legal and beneficial owners are the same people i.e. where a couple jointly own their home or have a joint bank account
- Trusts set up before October 6, 2020 holding assets valued at less than £100
- Will trusts which are wound up within two years of death
- Trusts for bereaved minors
- Trusts where the beneficiary is disabled
- Trusts of life policies paying out on death, terminal illness or disability
- UK charitable trusts
- Maintenance Fund Trusts (trusts approved by HMRC for the maintenance of specific historic buildings or land)
- Trusts created to set up a bank account for minors or vulnerable people
- Trusts holding insurance policy benefits
- Trusts holding healthcare, life or retirement policies
- ‘Financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets
When should the trusts be registered?
Non-taxable trusts in existence on October 6, 2020 must register by September 1, 2022, while non-taxable trusts created after October 6, 2020 must register within 90 days or by September 1, 2022, whichever is the later.
Relevant taxable trusts must register by January 31 (or in some cases October 5) following the end of the tax year in which the trust acquires a liability to relevant UK tax.
Changes to TRS records on trusts and/or beneficial owners must be notified within 90 days of the date of the change.
A trust which was in existence on October 6, 2020, or has been created since then, and now closed, still needs to register by September 1, 2022. It should be removed from the register after it has been registered.
The liability rests with the trustees and failure to register could mean financial sanctions for the trustees involved.
Information here is not an exhaustive list – other types of trusts may also fall within the requirement for registration.
For more examples, see www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm10030
For more information on registrable and excluded trusts see www.gov.uk/guidance/trust-registration-extension-an-overview
More detailed technical information can also be found in the Trust Registration Service Manual at www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual
If you think the obligation to register a trust affects you and you would like assistance in the registration of that trust, contact our Private Client team on 0344 967 2505 or via Woodfines