UK express trusts and some non-UK trusts in existence on or after 6th October 2020 must be registered with the UK Trust Registration Service (TRS) by 1st September 2022.
On 6th October 2020, as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), new rules were introduced to extend the scope of the trust register to all UK and non-UK trusts that are currently open, regardless of whether or not the trust has to pay any tax, apart from some specific exclusions.
The Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. The TRS was set up in 2017 as part of an EU anti-money laundering directive aimed at combatting money laundering, serious crime and terrorist financing.
Previously, only trusts that were liable to pay any of the following taxes were required to register with the TRS:
- Capital Gains Tax
- Income Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax
- Land and Buildings Transaction Tax (in Scotland)
- Land Transaction Tax (in Wales)
The new rules have extended the registration requirement to all UK trusts including ones not liable to tax unless the trust is specifically excluded.
Who should register?
There are two reasons whereby a trust may be registrable on the TRS:
- As a registrable express trust
All UK express trusts, and some non-UK express trusts, are required to register, unless specifically excluded from registration as an ‘excluded express trust’.
An express trust is a trust created deliberately by a settlor, usually in the form of a document such as a written deed or declaration of trust. Express trusts can be contrasted with trusts that come into being through the operation of the law and that do not result from the clear intent or decision of a settlor to create a trust or similar legal arrangement.
- As a registrable taxable trust
All UK and non-UK trusts with a liability to UK taxation are required to register, even if not required to register as registrable express trusts.
A trust may fall within one or both of these categories, however if it meets either of the requirements, it must be registered with the TRS.
Excluded express trusts
Certain express trusts are excluded from the registration requirements as they are considered to have a lower risk of money laundering or terrorist financing. These 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;
- Historic pilot trusts set up before 6 October 2020 and holdings no more than £100;
- 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; or
- ‘Financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets.
This list is not exhaustive and other less common types of express trusts are also excluded from registration unless they are liable to pay tax. A full list is set out in the legislation.
Please note that a trust that is otherwise excluded from registration is nevertheless still required to register if it has a liability to UK taxation.
Deadlines and penalties
- Non-taxable trusts in existence on or after 6th October 2020 must be registered by 1st September 2022 even if they are now closed.
- Taxable relevant trusts set up before 6th April 2021 must be registered on or before 31st January after the tax year in which the tax liability occurred (or by 5th October after the end of the tax year for a first-time liability to income tax or capital gains tax).
- Trusts set up between 6th April 2021 and 3rd June 2022 must be registered by 1st September 2022.
- All taxable and non-taxable relevant trusts set up on or after 4th June 2022 must be registered with 90 days.
Penalties may be incurred where trusts are not registered before the registration deadline. More severe penalties may also arise where it is deemed that the registration requirements have been deliberately ignored.
As always, if you would like any further information regarding the above, please feel free to contact our offices by email email@example.com.