Non-registration could attract a financial penalty from HM Revenue and Customs which is responsible for administering the register.
Private client practitioners will know that the final deadline for registration was 1 September 2022, so trustee clients should have been contacted well ahead of that date to ensure compliance with the new requirements. Registration is through HMRC’s online portal.
What’s the background?
The changes (introduced by The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020) tighten up the registration requirements in compliance with the Fifth Anti-Money Laundering Directive (5AMLD). It means that a significant number of non-taxable trusts must now be registered if they were in existence on or after 6 October 2020.
- All UK express trusts, discretionary trusts and declarations of trust of co-owned property (where the trustees and beneficiaries are not identical).
- Non-UK non-taxable trusts that acquire land or property in the UK, have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.
Importantly for probate lawyers, wills trusts arising on death must also be registered if the trustees hold the trust assets for at least two years. Deceased estates themselves are not required to be registered, though some estates may have to register for practical reasons (to obtain a UTR number) if the PRs need to complete a self-assessment return. HMRC expects a ‘lead’ trustee to be appointed on behalf of all the trustees who will deal with practical registration matters.
Any changes to the information about a trust as held on the register must be notified to HMRC within 90 days (this can be done online by trustees or their agent). If the trustees fail to register on time or do not keep the TRS up to date with changes, a £5,000 penalty could be imposed.
Excluded trusts (schedule 3A trusts)
As always, there are exceptions to the rules: certain non-taxable trusts – listed in Schedule 3A to the 2017 MLA Regulations – are excluded from the new registration obligations. These include:
- Personal injury trusts
- Charitable trusts
- Some pension scheme trusts and insurance policy trusts
- Trusts held for bereaved children or bereaved adults up to aged 25 which are established by will or under an intestacy or by the Criminal Injuries Compensation Scheme
- Bare trusts for a child’s bank account
- Pilot trusts that pre-date 6 October 2020 and hold no more than £100.
Only if an excluded trust becomes taxable must it then be formally registered.
If they have not already done so, practitioners should ensure trustees understand their registration obligations, particularly when new trusts are created and when key information changes.
The TRS manual has been regularly updated throughout 2022 to account for the extended registration rules. It now covers important matters relating to the trust information required; penalties for non-compliance: data requests by those with a ‘legitimate interest’; discrepancies in reporting; and answers to frequent questions.
It also includes a new section clarifying the types of trust that need to be registered, depending on whether tax is liable in relation to UK assets or UK-sourced tax income. It states, for example, that the registration requirement is not triggered by a UK tax liability arising to the trustees from non-UK assets.
The latest version of the TRS Manual can be found here.