A large number of trusts that were not previously required to register must now register on TRS in 2022.
The Trust Registration Service ("TRS") was first introduced in 2017 and enacted the EU Fourth Money Laundering Directive. The TRS, as part of HMRC's wider digital strategy, removed the ability for trustees to register and update trust records with HMRC in a paper format, such as via the trust tax return. The TRS is an online system and trustees are required to report the trust details to HMRC and update the register annually.
Until recently, only trusts with UK tax liabilities needed to be registered via this service (including any trusts that HMRC had already been notified of using the form 41G).
Update – 5AMLD extends the scope of the TRS
Now that The Fifth Money Laundering Directive ("5AMLD") has been implemented in the UK, the scope of the TRS has been extended significantly. Essentially, subject to a specific list of exceptions (see below) all of the following types of trusts are required to be registered on the TRS, even if they do not have a UK tax liability:
- existing UK express trusts;
- non-UK express trusts where one or more of the trustees is UK resident and that hold an interest in UK land or enter into a business relationship with a relevant person (e.g. accountant of lawyer) in the UK; and
- non-UK express trusts where none of the trustees are UK resident and the trust acquires an interest in UK land.
Deadlines to register a trust
The government previously set a deadline of 10 March 2022 to register the above trusts on the TRS. However, as the existing TRS system is still in the process of being upgraded so that it can cope with the expansion of registrations under the new rules, HMRC has recently issued a statement explaining that it intends to defer the deadline to twelve months after the new system is made available. We expect the new deadline to be sometime in Summer 2022, with April 2022 being the earliest possible deadline.
Going forwards, any new UK express trust established after 10 March 2022 (or later if the deadline is extended) needs to be registered within 30 days of creation. It is not, however, deemed appropriate to require trusts created by Will to be registered within 30 days of the date of death. These trusts will not be required to register on the TRS if they only receive assets from the deceased's estate and are wound up within two years of death. The deadline for registering such trusts is, therefore, two years after the date of death if the Will trust is to be retained.
Any updates to the information held on the TRS are also required to be made within 30 days of the relevant trigger event, i.e. within 30 days of the following:
- a change of trustee (including the death of a trustee);
- a distribution to a "new" beneficiary (i.e. a beneficiary who is not already named on the TRS);
- the death of a beneficiary named on the TRS; or
- the winding up of the trust.
A summary of some of the key exemptions that may apply to our clients include:
- trusts imposed by statute where these do not result from the clear intention of the settlor, for example the statutory trust arising on intestacy;
- UK-registered pension trusts;
- charitable trusts regulated in the UK;
- pure protection life insurance policies and those paying out on critical illness or disablement, including group pensions;
- trusts for vulnerable beneficiaries or bereaved minors;
- personal injury trusts;
- maintenance fund trusts;
- certain trusts incidental to commercial transactions;
- co-ownership trusts, where the trustees and beneficiaries are the same persons (i.e. the beneficial ownership mirrors the legal ownership);
- as mentioned above, will trusts created on death that receive assets only from the estate and trusts that receive death benefits only from a life insurance policy and are wound up within two years of death; and
- trusts already in existence at 6 October 2020 that are holding assets valued at less than £100 (unless/until further assets are added).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.