Trust registration is nothing new. The Trust Registration Service (TRS) has been in operation since being introduced by the Fourth Money Laundering Directive (MLD4) in 2017, and before then certain trusts needed to be registered with HMRC using the old 41G forms. The Fifth Money Laundering Directive (MLD5) is now expanding the scope of trust registration requirements to bring more trusts under the TRS.
Prior to MLD5 trusts only needed to be registered with the TRS if they were express trusts with UK tax consequences. This included all UK express trusts where the trustees had incurred a tax liability. It also included non-UK resident express trusts which received UK source income or otherwise incurred a UK tax liability. This left a lot of trusts outside of the scope of registration.
Under new provisions introduced by MLD5 this limitation to only register trusts that incur UK tax is removed. Under MLD5 all trusts must be registered with the TRS with some exceptions.
Which trusts are excluded from registration?
MLD5 adds a new schedule to the MLR 2017 setting out which trusts are excluded from registration. This is Schedule 3A (Excluded Trusts) MLR 2017. These excluded trusts are:
- Will trusts created on death that only receive assets from the estate and are wound up within two years of death.
- Statutory trusts – this includes the statutory trusts arising on intestacy.
- Pension scheme trusts that are holding assets of a pension scheme which belongs to a pension scheme that are already subject to regulation by either the Financial Conduct Authority or the Pensions Regulator.
- Trusts holding life insurance policies which only pay out on death, illness, or disability.
- Charitable trusts. These are trusts for charitable purposes which in Scotland or Northern Ireland is registered as a charity; or in England and Wales, is registered as a charity or not required to register by virtue of section 30(2)(a) to (d) of the Charities Act 2011.
- Pilot trusts holding less than £100 and which were set up before 6 October 2020.*
- Co-ownership trusts where the trustees and beneficiaries are the same persons. This refers to joint ownership of land and joint bank accounts where the owners are holding the on trust for themselves i.e. a couple who own their home jointly with no one else.
- Certain express trusts established to meet legislative conditions, for example:
- a trust for a disabled person
- a trust for bereaved minors
- an 18-25 trust
- A trust created by a relevant supervised person for the purpose of holding client money, securities or other assets.
- Personal injury trusts
There are other types of trust that are exempt from registration that have not been mentioned here as they are less not relevant to Will Writers & Estate planners, for example trusts created to enable Public Authorities to carry out their duties and trusts to enable commercial transactions.
Note that one of the more significant changes is that bare trusts now need to be registered.
Whose duty is it to register?
It is the duty of the Trustees of a settlement that must be registered to ensure that the relevant information is collated and the trust registered with the TRS. As with many other trustees’ duties they may employ an agent to deal with this on their behalf. It is also their duty to ensure that the TRS is updated within 30 days of any changes to the trust.
If a trustee fails to register the trust on time or update the register when there are changes they may face a fine of £100 per offence.
A will-based trust does not need to be registered until after the testator’s death as this is when it actually comes into existence.
When must trusts be registered?
For the time being the deadline for registration of taxable relevant trusts are the same as before. A taxable trust created before 6 April 2021 must be registered by 5 October or 31 January after the end of the tax year in which the tax liability first arises.
Originally we reported that the deadline for registering new trusts and existing trusts that now come under the scope of registration with the TRS was 10 March 2022. This meant that taxable relevant trusts set up on or after 9 February 2022 must be registered within 30 days of the trustees becoming liable to pay UK taxes, and non-taxable express trusts must be registered within 30 days of the trust being set up.
However, the TRS is currently being updated ready for the new registration requirements and will not be ready for Spring 2021 as initially stated. It is expected to be ready later this year. HMRC has stated that the registration deadline will therefore be extended for a period of 12 months from the date when the TRS becomes available. Currently that leaves a vague registration deadline of Summer 2022.
This gives plenty of time for trustees of existing settlements to gather the information they will need to register the trust when it becomes necessary.
11th June 2021 at 4:42 pm
Thank you for this update very interesting
12th June 2021 at 9:29 am
Oh what fun the TRS is ! 🙁
John Welsby (Solon Legal Services Ltd)
13th June 2021 at 11:12 am
just for clarity Siobhan can you confirm if there is a need to register;
1. testamentary IPDI trusts, very commonly used to protect the half share owned by the first of two spouses to die, from care fees or sideways disinheritance?
2. intervivos property protection trusts established by spouses where each spouse puts their own half share into a separate trust, providing a life interest for themselves, followed by a life interest for their spouse (if they are survived by them) and when the life interests are terminated there is then a continuing discretionary trust for the remaining beneficiaries?
14th June 2021 at 9:43 am
Hi John, both of these types of trust will need registering when the new rules come into force.
14th June 2021 at 6:45 am
Thank you Siobhan and Society for clarity. The survivor of tenants in common giving notice also severance of the joint tenancy are still free of registration as I understand it.
14th June 2021 at 9:42 am
Hi Megan, that’s correct. This comes under the co-ownership trusts exclusion.
13th July 2021 at 6:45 pm
So, people who are benefiting from an old FLIT after first death, Will need to register?
If so, who is going to tell them?
9th August 2021 at 9:56 am
Hi Kevin, that’s right. When the new registration rules come into force many existing trusts will need to register. Ideally professionals who have assisted in the provision of trusts will notify clients of their new obligation to register. HMRC have recently emailed around a bulletin to companies who they believe deal with trustees and requested that they pass on some information about the TRS as we received one that began:
“We believe that your organisation may deal with trustees. We’d appreciate your help in raising awareness, amongst trustees, about the need for non-taxable trusts to register their details with HMRC.”
So it appears that this is also HMRCs expectation.
29th November 2021 at 1:35 pm
So, if a FLIT was created as part of a severance of joint tenancy arrangement, that would meet the requirements of the co-ownership exemption?
29th November 2021 at 4:21 pm
Hi Kevin, only up until the FLIT was actually created. The act of severing the tenancy so they hold as tenants in common and the subsequent co-ownership trust this creates is exempt from registration. Once the first death occurs and the FLIT is actually created this will need to be registered, although see also the 2 year will trust exemption.