IMPORTANT UPDATE to the Trust Registration Service (TRS) – action needed by Trustees to avoid a penalty

Woodfines Solicitors

15th June 2022

Introduced as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), HM Revenue & Customs (HMRC) has extended the requirement for trust registration to non-taxable UK trusts and some non-UK trusts. 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 with no backstop date, provided in existence on or after 6 October 2020;
  • non-UK express trusts that acquire an interest in land in the UK on or after 6 October 2020 and
  • non-UK express trusts that have at least one trustee resident in the UK and which enter into a business relationship on or after 6 October 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 Will, Deed or Declaration of Trust.

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.

  • Complex estates – those with substantial CGT or income tax liabilities
  • Nil rate band trusts holding property interest or debt
  • Will trusts exceeding 2 years post death
  • Small pilot trusts – if holding £100+ or set up after 6/10/2020 

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.
  • Co-ownership trusts set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’.
  • Trusts set up before 6 October 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 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 which in existence on 6th October 2020 must register by 1st September 2022.

Non-taxable trusts created after 6th October 2020 must register within 90 days or by the 1st September 2022, whichever is the later.
Relevant taxable trusts must register by 31 January (or in some cases 5 October) 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 6 October 2020, or created since then, and now closed still needs to register by 1 September 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.

This 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

Further information

For more information on registrable and excluded trusts, please 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 the trust, please contact our Private Client team

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