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?
HMRC have recently been able to provide the deadlines for registration as the updated TRS has been in place since 1 September 2021 and open to non-taxable trust registration.
- non-taxable trusts in existence on or after 6 October 2020 by 1 September 2022
- non-taxable trusts created after 1 September 2022 within 90 days
- changes to the trust details or circumstances, within 90 days of the change
- Taxable relevant trusts that are created on or after 6 April 2021, within 90 days of the trust becoming liable for tax or by 1 September 2022 (whichever is later)
- Taxable relevant trusts created before 6 April 2021 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.
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.