The Trust Registration Service

The Trust Registration Service (TRS) is a register of the beneficial and legal ownership of trusts and complex estates. It first came into effect in June 2017 as part of the adoption of the 4th Anti-Money Laundering Directive (4MLD) and has become more important than ever before with HMRC looking to tackle anti-money laundering.

The information that needs to be reported on the TRS includes information about the lead trustee, the co-trustees, the settlor and the beneficiaries. This includes information such as name, date of birth, NI Number, country of residence and country of nationality. More detailed information about what needs to be reported is included at the following link – Register a trust as a trustee – GOV.UK (www.gov.uk)

What is the Trust Registration Service (TRS)?

As well as trusts, complex estates must also be registered on the TRS.

A complex estate is an estate where one or more of the following applies:

• The gross probate value exceeds £2.5 million
• The tax liability for the administration period exceeds £10,000
• The value of assets sold by the personal representatives in any one tax year exceeds £500,000

TRS for Deceased Estates

The TRS data can be made available by HMRC to those with a ‘legitimate interest’. This includes law enforcement agencies investigating money laundering offences. HMRC can refuse access depending on the circumstances.

Who can access the TRS?

The introduction of the 4MLD meant that trustees were required to register on the TRS if the trust was liable to pay any of the following taxes:

• Income Tax
• Capital Gains Tax
• Inheritance Tax
• Stamp Duty Land Tax (and the Scottish/Welsh equivalent) or

Stamp Duty Reserve Tax

This only applied to ‘express’ trusts with UK liabilities in a given tax year. An express trust is broadly a trust created deliberately in express terms, during the settlor’s lifetime or via their Will, usually in writing as opposed to a trust inferred by law.

Rules introduced in 2017 – 4th Anti-Money Laundering Directive (4MLD)

From 6 October 2020 as part of the UK’s implementation of the 5th Anti-Money Laundering Directive (5MLD) the TRS was extended to all express trusts regardless of whether they have any UK tax liability, unless one of a limited range of exemptions apply. There has also been a change in the TRS reporting requirements based on the classification of the trust, referred to by TRS as either ‘taxable trusts’ (those with a UK tax liability) or non-taxable ‘express’ trusts (those created by a written deed).

What has changed?

The deadlines differ for trusts caught under the 4MLD (taxable express trusts) or the 5MLD (non-taxable express trusts).

4MLD (taxable) trusts

For trusts that were created before 6 April 2021 the deadline for registration is 31 January following the end of the tax year in which the first tax charge occurs. If the trust incurs an income tax or CGT liability for the first time the deadline is brought forward to 5 October following the end of the tax year it first incurs the liability. This is to enable HMRC to issue a Unique Taxpayers Reference number to file a return accordingly.

For trusts created on or after 6 April 2021 the deadline for registration is 1 September 2022 or within 90 days of the trustees becoming liable to pay UK taxes if later.

Trustees of taxable trusts registered on the TRS are required to update any changes to the trust details or beneficial ownership with 90 days of the change in order to meet the TRS obligations.

5MLD (non-taxable) trusts

Most UK non-taxpaying express trusts in existence on or after 6 October 2020 must now be registered by 1 September 2022. Similar to taxable trusts, any changes to the trust details or beneficial owners are required to be updated with 90 days.

Deadlines

Certain types of trust are still excluded from the new extended TRS registration requirements:

• Pension Schemes
• Charitable Trusts
• Trusts holding insurance policies while the life assured is still alive
• Trusts holding proceeds from insurance policies received on the death of the life assured
• Pilot trusts – trusts holding not more than £100 and already in existence before 6 October 2020 are excluded
• Will Trusts – excluded from registration for two years from date of death. If it is still in existence after that date or if at any point property is added from outside the estate, it will need to register from that date
• Trusts set up under intestacy rules and Personal Injury Trusts set up under a court order to receive compensation
• Trusts for bereaved children under 18, and 18-25 trusts
• 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 required in order to open a bank account for a child

What are the exclusions?

It is a legal requirement for trustees to register all applicable trusts. Penalties can be enforced for failing to register. In 2018 it was proposed that a penalty of £100 would apply for missing a deadline with this penalty increasing to £200 if the failure extended beyond 3 months. If the failure to register exceeded 6 months, HMRC proposed that the penalty would be either 5% of the total tax liability or a £300 penalty, whichever is the greater.

HMRC have recognised that many trusts have failed to register and there are fears that the changes have not been publicised sufficiently. HMRC has recently confirmed that it will not issue a fine if a September deadline is missed unless it can be shown the failure was deliberate. It is expected that the penalties will be enforced more rigorously as the TRS awareness widens.

Penalties for failing to register

It is a legal requirement for trustees to register all applicable trusts. Penalties can be enforced for failing to register. In 2018 it was proposed that a penalty of £100 would apply for missing a deadline with this penalty increasing to £200 if the failure extended beyond 3 months. If the failure to register exceeded 6 months,

HMRC proposed that the penalty would be either 5% of the total tax liability or a £300 penalty, whichever is the greater.

HMRC have recognised that many trusts have failed to register and there are fears that the changes have not been publicised sufficiently. HMRC has recently confirmed that it will not issue a fine if a September deadline is missed unless it can be shown the failure was deliberate. It is expected that the penalties will be enforced more rigorously as the TRS awareness widens.