New HMRC Trust Registration Service (TRS)

New HMRC Trust Registration Service (TRS)

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.

Introduced as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), these new rules ensure the UK has an up-to-date anti-money laundering and counter terrorist financing regime that is effective and proportionate, as well as providing improved transparency about the ownership of assets held in trusts.

Trustees are now able to register trusts under the new rules using the extended TRS online service which opened in September 2021. The deadlines for registration under the new rules include:

• non-taxable trusts in existence as at 6 October 2020 or created on or after 6 October 2020 and before 4 June 2022 – by 1 September 2022;
• non-taxable trusts created on or after 4 June 2022 – within 90 days of creation (subject to legislation); and
• changes to the trust details or circumstances – within 90 days of the change (subject to legislation).

In this insight, we outline who will be required to register, based on HMRC’s current guidance, and this is by no means exhaustive. It is also worth noting that the government and professional bodies are still exploring remaining policy issues in this area and are expected to release further changes and announcements in due course. As the rules surrounding the TRS are complex, our Private Client tax team are able to assist with any queries or concerns.

Registration requirements

The main categories of trusts caught by the new requirements include:

1. UK express trusts, subject to exclusions (see below); and
2. Non-UK express trusts, which:
   - Acquire land or property in the UK on or after 6 October 2020 (these trusts will be on the register but will not be subject to the third-party data sharing provisions unless otherwise required); or
   - Have at least one UK resident trustee and enter a new business relationship with a UK ‘relevant person’ (broadly a UK professional service provider) on or after 6 October 2020. 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.

An express trust is a trust deliberately created by a settlor, such as in the form of a deed or declaration of trust. Certain types of trusts, such as statutory trusts set-up under the terms of legislation, are not express trusts.

There are some further important changes and points to note:

• More trusts, including UK resident trusts without UK tax liabilities and most bare trusts, will be required to register.
• For taxable trusts, more information about beneficial owners will have to be provided.
• It is anticipated that the register will not be fully publicly accessible. However, information held on the register will become more widely available, including to parties with a legitimate interest. In addition, certain UK service providers will be required to confirm that a trust is registered on the TRS before commencing a business relationship with it. If the trust has been registered under 5MLD in an EEA Member State already, it should not be required to register again via the TRS. However, taxable trusts and trusts with no UK resident trustees which hold UK land will still need to register on the TRS.

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 financing terrorism. These 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, e.g. the statutory trust arising on intestacy
• trusts created by court order
• UK registered pension trusts
• certain trusts used to hold a life insurance policy, income protection policy, retirement benefits policy or healthcare policy (the rules are complex and specific advice should be taken if this is to be relied on)
• charitable trusts regulated in the UK
• trusts holding insurance policy benefits providing the benefits are paid out within 2 years of the death of the person assured
• ‘pilot’ trusts which were set up before 6 October 2020 for a future use and which hold no more than £100
• 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
• co-ownership trusts, holding jointly-owned property, where the trustees and beneficiaries are the same persons
• ‘financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets
• trusts for vulnerable beneficiaries or bereaved minors
• personal injury trusts
• trusts used by government and other UK public authorities
• save-as-you-earn schemes and share incentive plans
• maintenance fund trusts
• authorised unit trusts
• bank accounts held on trust for minor children or those lacking mental capacity.

It should be noted that the list of exclusions does not include bare trusts, with very limited exceptions, including those relating to certain bank accounts held on trust.

Provision of information

All trusts within the scope of registration will have to provide information on each beneficial owner, including their name, month and year of birth, country of residence, nationality and details of their beneficial interest in the trust. Beneficial owners include the settlor, trustees, beneficiaries, and other parties who exercise control over the trust. Additional information is required for taxable relevant trusts already registered, by 1 September 2022.

Registration deadlines

The interaction of the new and old rules and registration deadlines is complex and further guidance is needed, but the deadlines are believed to broadly operate as follows:

• For a taxable trust which was created and becomes taxable 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).
• For trusts set up on or after 6 April 2021, they must register by the later of 1 September 2022 and 90 days after the trust first becomes registrable.
• For non-taxable trusts which come within the new rules, they must register by the later of 1 September 2022 and 90 days after the trust first becomes registrable.
• Taxable trusts already registered have until 1 September 2022 to provide additional information required under the extended TRS.

For any changes to the information, it is understood that the deadline by which the TRS must be updated depends on whether this was provided under the old or new rules.

• Information provided under the old rules for taxable trusts already registered, by 31 January following the tax year of change in a year where the trust has a relevant tax liability.
• Information provided under the new rules for all types of trusts (including the additional information required for taxable trusts), within 90 days of the date of the change.

For practical purposes, it may be simpler to update any changes required within 90 days of the change, rather than having to distinguish between the information provided under the old rules and the new rules. We await further HMRC guidance to see whether these two deadlines will be brought together in practice.

Taxable trusts with ongoing tax liabilities are required to declare on their tax return that the trust is up-to-date on an annual basis by 31 January.

Failing to comply within the deadlines will run the risk of receiving penalties. Our team of specialist tax advisors can provide further details on the proposed penalty regime if required. Speak to a member of our Tax Team today. 

Trust Registration Service Flowchart | Do you need to register?

Many trustees need to register details of their trusts before Autumn 2022. Our flowchart can assist in determining the registration requirements and deadlines under the TRS. 

Download your copy of our flowchart here