Changes to the Trust Registration Service: when should you register your Trust?
The Trust Registration Service (TRS) (set up following the UK’s implementation of the EU Fourth Anti-Money Laundering Directive) has required all Trusts, from 2017, which hold a tax liability to be registered with HMRC. As of 6th October 2020, the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations took effect, broadening the scope of the newer Fifth Anti-Money Laundering Directive (MLD5 ) to require all non-taxable express Trusts to be registered under the service, with some exceptions.
With a deadline fast approaching to register non-taxable Trusts by 1st September 2022, it is important to understand when your Trust needs to be registered, who is responsible for registration and what exemptions may apply to your Trust.
What types of trusts need to be registered?
The new TRS now requires that all express trusts must be registered with HMRC, irrespective of whether there are any tax liabilities. This includes trusts that are already in existence. The following types of trusts more commonly used now need to be registered: –
- Discretionary trusts
- Bare trusts for grandchildren
- Trusts created by Wills where the trust is still in existence two years after the date of death (such as Life Interest Trusts)
- Some non-UK resident trusts
- Trusts where there is an immediate post-death interest (IPDI trusts)
The types of tax that the MLD5 covers are Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, Land and Buildings Transaction Tax (Scotland) and Land Transaction Tax (Wales).
What types of trusts may be exempt from registration?
MLD5 excludes the following trusts from registration: –
- Will trusts where the trust only receives assets from the estate and is wound up within two years of the date of death
- Statutory trusts (such as a trust as a result of intestacy or bankruptcy)
- Co-ownership trusts where the beneficiaries and trustees are the same persons (unless the beneficial owners are not the legal owners)
- Pilot trusts where the trust holds less than £100 and was set up prior to 6 October 2020 (a pilot trust set up after this date will still have a registration obligation)
- Trusts created to set up a bank account for a minor or vulnerable person
- A trust for a disabled person
- A trust for bereaved minors
- A personal injury trust
- An 18-25 trust
- Trusts that pertain only to an insurance policy where payment is not made until death or terminally illness
- Charitable trusts
Who is responsible for registering the trust?
Legal responsibility for registering, reviewing and updating the trust each year lies solely with the trustees of that trust. Where there are several trustees, all trustees are equally responsible. A ‘lead’ trustee can be nominated to register the trust with HMRC but will simply be the point of contact and this does not mean that the ‘lead’ trustee is more accountable.
Trustees are able to appoint an agent to register a trust in their place.
When should you register a trust?
The new proposed deadlines for registration of all non-taxable trusts are as follows: –
- Non-taxable trusts in existence on or after 6 October 2020 will need to be registered by 1 September 2022
- Non-taxable trusts created after 1 September 2022 will need to be registered within 90 days
- Any changes to the trust details/circumstances will need to be updated on the TRS within 90 days of the change
What will happen if a trust is not registered?
Whilst HMRC recognises that more laypersons now have to register trusts and have considered a more lenient approach, they still have the power to charge financial penalties for failure to update trust records and failure to register.
If you are a trustee and think that you may need to register your trust, please contact us. It is essential that you register your trust to avoid any potential penalties.
