The Trust Registration Service – Ensuring Your Trust Complies With New Rules

Following the 5th Anti-money Laundering Directive (AMLD), HMRC introduced changes to the trust registration rules which means that more trusts will now need to be registered with the HMRC trust registration services. The new rules apply to trusts in existence on or after 6 October 2020. This obligation adds to the already onerous task of complying with the Foreign Account Tax Compliance Act (FATCA), Legal Entity Identifier (LEI) and Common Reporting Standard – and that's before you even consider the demands of tax returns!

HMRC note that this increasing focus on compliance is to "ensure that the UK has an anti-money laundering and counter terrorist financing regime that is up to date, effective and proportionate, and improve transparency about the ownership of assets held in trusts". With these noble intentions comes increased administration for trustees, and the need to register should be identified promptly, so that these requirements can be adhered to.

Existing registration requirements

For taxable relevant trusts, registration is already necessary, and has been since 2017. Taxable relevant trusts are express trusts that incur a UK tax liability, including income tax, capital gains tax and inheritance tax. The Trust Registration Service is therefore already in place and holds information on these trusts to assist law enforcement agencies in tackling money laundering and terrorist financing.

In addition to the extensive information these trusts already report (such as information on the trust assets and their values), taxable relevant trusts must now also provide information about each beneficial owner, including their name, nationality, country of residence, and the extent of their interest in the trust.

New registration requirements

The extension of the registration requirement affects all trusts in existence on or after 6 October 2020 significantly and all trustees should consider whether it applies to their trust. The Trust Registration Service opened for new registrations on 1 September 2021, so now is the perfect time to ensure your trust is compliant.

In general,

  • All UK express trusts will need to be registered within 90 days of creation and all existing trusts will need to be registered, including bare trusts containing just a property or a loan for example.
  • Non-UK express trusts with land or properties in the UK
  • Non-UK express trusts, with at least one UK resident trustee, which enter into a business relationship within the UK

Excluded Trusts

There are exceptions where some trusts will not need to be registered unless they are liable to pay tax:

  1. Pilot trusts created before 6 October 2020 with less than £100 (any new pilot trusts will need to be registered regardless of the value of the initial trust fund)
  2. Trust arising from intestacy, bereaved minor beneficiaries trust and 18-25 trusts arising from the Will of a deceased parent
  3. Insurance policy trusts provided the policy always pays out on death, critical illness etc and trusts holding the proceeds of life policies provided they are paid out within two years of death
  4. Charitable trusts that are registered charities
  5. Will trusts appointed within two years of death (if the trusts continue then they will need to be registered within 90 days from the expiration date of the two years).
  6. Trust for children set up by deceased parents under their Will or intestacy
  7. Personal Injury Trusts arising from a Court Order. Trust receiving compensations settled outside court are not included.
  8. Trusts holding shares of a property or other assets for the owners as tenant in common. Please note this is only applicable where the registered owners are the same as the beneficial owners. If there are any other beneficial owners of the property or other assets (such as company shares), the trust needs to be registered, e.g. if two people on the title hold the property for five people or parents holding shares for their children. A couple holding the legal title of a property for themselves will not need registering.
  9. Financial or commercial trusts created during professional services or business transaction for holding client money or other assets

Deadlines for registration  

Registrable trusts that incur a UK tax liability must be registered by 31 January following the end of the tax year in which the trust had a liability to UK taxation. This is in line with the previous registration process, and so some trusts may need to register by 31 January 2022.

Trusts which fall under the extended registration requirements must be registered by 1 September 2022.

Any changes to the information held on trusts that are already registered must be reported to HMRC. Currently it is updated via an annual confirmation, but from January 2022 it is the responsibility of the trustees to update the register within 90 days of the change.

What next?

These deadlines highlight that trustees will need to take action within the next few months, to ensure that no deadlines are missed. The time-consuming nature of trust administration should not be underestimated, and the registration process should be initiated as soon as practicable.

It is recommended that every trustee consider whether these new requirements apply. If they are unsure, they will need to seek further advice. Where a trust needs to be registered, the trustees will then need to obtain information from the beneficiaries as soon as possible. Do not wait till the last minute.

The new rules may be onerous, but compliance can be achieved!

If you would like the assistance of Foot Anstey's UK Succession and Tax team, contact me today at [email protected].

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