As you may know, new trust registration rules were introduced in October 2020, as part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD).
This directive extended the scope of the trust register to all UK and some non-UK trusts that are currently open, with some specific exclusions.
If you’re a trustee, you have a legal duty to comply with HMRC reporting requirements. So, it’s important that you understand your obligations and when a trust should be registered.
Here’s a brief summary of the key points:
All UK and some Non-UK Express trusts have to register
This means that you’ll need to register all UK express trusts, unless they are specifically excluded (see below).
You’ll also have to register non-UK express trusts that acquire land or property in the UK or have at least one trustee resident in the UK and enter into a “business relationship” within the UK.
You will also need to register a trust if it is liable to paying one of several UK taxes
Under the new directive, trustees or their agents must register a trust using the TRS if the trust is liable to pay any of the following taxes:
- Capital Gains Tax (CGT)
- Income Tax
- Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (in Scotland) or Land Transaction Tax (in Wales)
- Inheritance Tax (IHT).
Deadlines for registration
Trusts that fall under the jurisdiction of the new regime are required to register by the deadlines noted below depending on the type of trust.
The registration deadline for non-taxable trusts that fall within the expanded TRS regime is 1 September 2022.
Where such trusts only become registrable on or after 4 June 2022, trustees will have to register within 90 days of the trust becoming registrable.
HMRC has confirmed that non-taxable trusts set up on or after 6 October 2020 but wound up before 1 September 2021 will still need to register on the TRS.
Taxable trusts set up prior to 6 April 2021
Trusts liable for Income Tax or CGT for the first time must be registered by 5 October after the tax year in which the trustees first become liable for either tax.
Other trusts liable for UK taxes must be registered by 31 January after the tax year in which the trustees have such a tax liability.
Taxable trusts set up on or after 6 April 2021
These trusts must now be registered by 1 September 2022 if trustees become liable to pay UK tax before 4 June 2022.
In all other cases they must be registered within 90 days of the trustees becoming liable to pay UK tax.
Where non-taxable trusts that fall within the expanded TRS regime have already registered before they have UK tax liability, further information would have to be provided when such trusts become taxable trusts. The deadline for providing the further information would be as per above depending on whether the trust was set up before or after 6 April 2021.
Trustees have 90 days to update the register
Trustees have 90 days to update the TRS after becoming aware of any changes to the information held on the register.
Examples of changes may include the retirement or appointment of new trustees or a change to the class of beneficiaries.
As part of the filing of the annual UK tax return, trustees need to declare that the trust’s information is up to date on the TRS.
Trusts that do not need to be registered
Certain trusts do not need to register unless they are liable to pay UK tax. These include:
- Trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme
- Charitable trusts that are registered as a charity in the UK, or are not required to register as a charity
- 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 life assured
- Trusts holding insurance policy benefits received after the death of the life assured, providing the benefits are paid out from the trust within two years of the death
- “Pilot” trusts set up before 6 October 2020 and which hold no more than £100 (note that pilot trusts set up after 6 October 2020 will need to register)
- Trusts imposed by statute such as on intestacy or bankruptcy
- Co-ownership trusts where the legal and beneficial owners are the same persons (commonly found where a couple jointly own their home or have a joint bank account)
- Financial or commercial trusts created in the course of professional services or business transactions for holding client money or other assets.
It is important to make sure you register your trust in time
If you are required to register a trust, it’s important that you start the process in plenty of time.
The gathering of information from beneficiaries can take time and it is important that you meet your registration obligations. A failure to register a trust or to notify any change of information by the due date can result in penalties being charged.