• Date

    23 Apr 2021
  • Category

    Tax, Private Client

Fifth Money Laundering Directive and Trust Registration Service

Extension of scope

New rules were introduced on 6 October 2020, which extend the scope of the trust register to all UK express trusts and some non-UK trusts, regardless of whether the trust has to pay any tax, but with some specific exclusions.                  

The new rules were introduced as part of the UK’s implementation of the Fifth Money Laundering Directive to ensure that the UK has an anti-money laundering and counter terrorist financing regime that is up to date, effective and proportionate, and improved transparency about the ownership of assets held in trusts.

At present, trustees cannot register trusts under the new rules as the TRS service is being updated. It is expected that the new TRS service will be ready later in 2021. Currently, the deadline for registration is 10 March 2022, however it is expected that this will be extended to 12 months from the date that the new TRS service is available.

Once the new TRS service is available, a 30-day deadline will apply for new trust registration and updating information on the register. This note is by no means exhaustive and the main purpose is to outline who will be required to register based on HMRC’s current guidance. It is also necessary to note that the government is still exploring remaining policy issues in this area and therefore further changes and announcements are likely.

Excluded Trusts

Certain express trusts are set up for a very limited purpose and their nature is such that they are unlikely to be used for money laundering or terrorist financing. Such trusts are specifically excluded from having to register unless they are liable to pay UK tax.

The following types of trusts will be exempt from registration on the TRS:

  • trusts imposed by statute, where these do not result from the clear intention of the settlor. For example, the statutory trust arising on intestacy
  • UK registered pension trusts
  • charitable trusts regulated in the UK
  • trusts used to hold a life insurance policy, income protection policy, or retirement benefits if the policy only pays out on death, terminal/critical illness or permanent disablement, or to meet the healthcare costs of the person assured and does not have a surrender value
  • trusts holding insurance policy benefits providing the benefits are paid out within 2 years of the death of the person assured
  • trusts used by government and other UK public authorities
  • trusts for vulnerable beneficiaries or bereaved minors
  • personal injury trusts
  • save as you earn schemes and share incentive plans
  • maintenance fund trusts
  • ‘financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets
  • authorised unit trusts
  • co-ownership trusts, where the trustees and beneficiaries are the same persons
  • will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy and are wound up within 2 years of death
  • ‘pilot’ trusts which were set up before 6 October 2020 for a future use and which hold no more than £100

Non-exempt trusts

The list of exemptions does not however include bare trusts and some important changes to note are as follows:

  • more trusts, including UK resident trusts without UK tax liabilities and bare trusts will be required to register,
  • for taxable trusts, more information about beneficial owners will have to be provided, and
  • information held on the register will become more widely available, including to anyone with a legitimate interest.

Any other trust set up to hold property, unless it falls within one of the ‘out of scope’ categories listed above, will need to be registered on the TRS. This includes any non-UK trust that acquires land or property in the UK, however these trusts will be on the register but will not be subject to the third-party data sharing provisions unless required elsewhere.

Non-UK trusts will only be required to register on entering a business relationship with a UK obliged entity if the trust has at least one UK resident trustee. This means that non-UK trusts with no UK resident trustees will not be required to register if their only link to the UK is through a business relationship with a UK based adviser.

If the trust has been registered under 5MLD in an EU Member State already, it should not be required to register again via the TRS. However, taxable trusts will still need to register on the TRS.

Provision of information

All trusts within the scope of registration will have to provide information on each beneficiary including their name, address, nationality and details of their beneficial interest in the trust. Further information will be required for taxable relevant trusts.

It is anticipated that the register will not be fully publicly accessible.

Registration deadlines (possibly subject to change)

  • For a taxable trust created before 6 April 2021 it must register by 31 January following the tax year in which a relevant UK tax liability arises (although for income tax and capital gains tax purposes there is a deadline of 5 October for registration following the end of the tax year and trustees should meet this deadline where relevant).
  • 10 March 2022 (but subject to change/delay) for trusts set up on or after 6 April 2021 which become liable to UK taxes before 9 February 2022.
  • 30 days from creation where a trust becomes liable to UK taxes after 9 February 2022.
  • For non-taxable trusts which come within the new rules before 9 February 2022, the TRS must be completed by 10 March 2022 (but subject to change/delay).
  • For non-taxable trusts which come within the new rules after 9 February 2022, they must register by the later of 30 days of creation or 30 days of first falling within the rules.

For all types of trust, the TRS must be updated with any changes within 30 days of the date of the change.

There may be penalties for non-compliance and we can provide further details on the proposed penalty regime if required.

Want to know more?

For further information, or to discuss any of the areas raised above in more detail, please speak with your usual Azets contact or a member of our tax team.

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