Extension of HMRC’s Trust Registration Service – key changes

New rules were introduced on 6 October 2020, as part of the UK’s implementation of the Fifth Money Laundering Directive. These rules extend the scope of the trust register to all UK and some non-UK trusts in existence on or after 6 October 2020, whether or not the trust has to pay any tax, but with some specific exclusions.

Owing to a delay in the rollout of these new rules by HMRC, extended deadlines and exclusions have only recently been published in the Money Laundering and Terrorist Financing (Amendment) Regulations 2022 (the Regulations), which came into force on 9 March 2022.

Read more below about the extended scope of these rules, actions required and the updated deadlines to be aware of.

What is the UK Trust Registration Service (TRS)?

In 2017, the UK Trust Registration Service (TRS) came into effect as part of the UK’s implementation of the EU’s Fourth Money Laundering Directive. The directive aimed to improve transparency around the beneficial ownership of assets held in trusts with UK tax liabilities as a way of identifying and stopping the misuse of trusts for money laundering and terrorist financing.

The Fifth Money Laundering Directive came into effect in October 2020 and significantly extended the scope of the TRS, with limited exclusions, to cover all UK express trusts and certain non-UK trusts (whether taxable or not).  The obligation to comply is not affected by Brexit as the UK transposed the Directive into UK law and the government has not announced any proposals to deviate from those requirements

Trusts caught within the new scope were originally required to register by 10 March 2022, however following a delay in the roll-out of HMRC’s upgraded TRS register, this deadline was extended. Details of the new deadlines, as well as confirmation of further exclusions for certain low-risk trusts, were included in the Money Laundering and Terrorist Financing (Amendment) Regulations 2022 (the Regulations), which came into force on 9 March 2022.

Express trusts, non-express trusts, and other changes covered by the new rules

As already stated, the Money Laundering and Terrorist Financing (Amendment) Regulations 2022 (the Regulations) have extended the scope of the TRS to cover (almost) all UK express trusts and some non-UK express trusts, in existence on or after 6 October 2020. 

The term ‘UK express trust’ broadly refers to a trust deliberately created by a settlor, and this can include common family arrangements that you may not initially think of as being a trust, such as: 

• Investment portfolios held on behalf of another person as nominee
• Family company shareholdings held for other members of family, including children
• Jointly owned land where the legal owners are not the same as the beneficial owners.

There are still some exemptions to the registration requirement, detailed below, but in general most trusts will be caught. 

Trusts which are not set up deliberately by a settlor but are imposed by Courts or created by legislation, are not ‘express trusts’ and therefore do not have to register unless they are liable to tax.

Examples of non-express trusts include those trusts that have been:

• set up under the intestacy laws when a person dies without a valid will and the assets in the estate are held by a trust before passing to relatives
• set up under a Court Order to hold compensation payments
• set up to hold jointly owned assets, such as a home jointly owned with a spouse, partner or relation as ‘joint tenants’, or a joint bank account (where the legal and beneficial owners are the same people).

Who needs to register?

The extension of the TRS from 6 October 2020 covers:

• All UK express trusts unless specifically excluded (see ‘Excluded Express Trusts’ listed below) 
• A non-UK trust which is an express trust; and
  • receives income from a source in the United Kingdom or has assets in the United Kingdom, on which it is liable to pay one or more of the taxes referred to in regulation 45(14); being Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax (or Welsh/Scottish equivalent) or Stamp Duty Reserve Tax;
  • any other non-UK trust which is an express trust, is not a trust listed in Schedule 3A (excluded trusts) and whose trustees (in their capacity as such)—
    • acquire an interest in land in the United Kingdom; or
    • enter into a business relationship with a relevant person, where at least one of those trustees is resident in the United Kingdom and the trust is not an EEA registered trust.

Excluded express trusts

Certain trusts do not need to register unless they are liable to UK tax (and therefore a ‘registerable taxable trust’). This is because they are considered lower risk for money laundering or terrorist financing.

These trusts include:

• trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme
• trusts used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured
• trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within 2 years of the death
• charitable trusts which are registered as a charity in the UK or which are not required to register as a charity
• ‘pilot’ trusts which were set up before 6 October 2020 and which hold no more than £100 – pilot trusts set up after 6 October 2020 will need to register
• 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’
• will trusts which are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to 2 years after the person’s death
• trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme
• ‘financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets.

Deadlines to note

Where there is a requirement to register under the TRS, the following deadlines apply:

• For trusts created before 4 June 2022, and not already registered as taxable trusts, the registration deadline is 1 September 2022.
• For Trusts created on or after 4 June 2022 registration is required within 90 days of creation.
• Additionally, any changes to details or circumstances of the trust must be updated within 90 days of the change taking place.

It is important to note that any express trust in existence on or after 6 October 2020 needs to register by 1 September 2022, even if it has closed before this date.

HMRC’s guidance states that the lead trustee may have to pay a penalty if they fail to register the trust before the registration deadline or fail to tell HMRC about any changes to the registration.

What should you do now?

If you are affected by the extension of the TRS please ensure you register with HMRC’s TRS by 1 September 2022 deadline and update the trust details within 90 days as and when necessary. 

Trusts can be registered via the HMRC website, but if you would like our assistance with this, please get in touch with one of our advisors.

Get in touch

The rules surrounding TRS are complex. If you think you may be affected by the changes and have any questions regarding the Trust Registration Service, or would like to discuss any further tax matters, please get in touch