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Remember to register non-taxable trusts

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Remember to register non-taxable trusts

As part of the UK’s implementation of the 5th Money Laundering Directive to give greater transparency as to the beneficial ownership of trust assets, HMRC has extended the requirement for trust registration to most non-taxable UK trusts. However, with only a small fraction of the anticipated numbers added to the register since it opened to these additional types of trusts last year, trustees should be urgently turning their attention to the impending deadline date and the potential penalties for any failure to register.

What are the new rules for registering trusts?

Set up by HMRC in 2017, the Trust Registration Service (TRS) is a digital platform which trustees must use to fulfil their trust registration obligations. The main purpose of the TRS is to reduce the risk of trusts being used as a vehicle for money laundering, where the register includes details of all parties to the trust, including the settlor, trustees and beneficiaries.

Prior to 6 October 2020, there was no requirement to register trusts with no tax liability, where only taxable UK trusts paying certain UK taxes needed to be placed on the TRS register. However, under the new rules, most express trusts in existence since 6 October 2020 must be registered, even those with no tax liability, unless they are specifically excluded. The registration requirement also extends to some non-UK trusts, including those with land or property in the UK, or at least one UK-resident trustee and a UK business relationship.

What types of Trusts need registering?

All UK express trusts unless covered by an exclusion. An express trust is a trust that was deliberately created. These include, but are not limited to:

  • Trusts for jointly held property where the beneficial title differs from the legal title eg the owners are holding the property for the benefit of others who are not on the legal title.
  • Discretionary trusts
  • Interest in possession trusts
  • Bare trusts

What is the registration deadline date?

Even though the new rules in relation to the registration of trusts were introduced on 6 October 2020, it took some time for HMRC to upgrade the existing TRS to take account of the new changes. Accordingly, the TRS only opened on 1 September 2021 for registrations which were brought into scope of the trust register by the requirements of the 5MLD.

However, with a deadline date of 1 September 2022, this has still given trustees a total of 12 months to register a non-taxable express trust, although it has been reported that only a small fraction of the estimated one million trusts affected by the rule changes have been registered to date. This means that for the thousands of trusts yet to be registered, trustees will have to act quickly to meet the deadline date and avoid any financial penalties. This includes any registrable trusts in existence on or after 6 October 2020, even if they have since ceased.

Where a trust is set up or otherwise becomes registrable in the 90 days immediately before 1 September 2022, the trust must instead be registered within 90 days of its creation date. Equally, non-taxable trusts created after 1 September 2022 must register within 90 days.

If you have either created a trust or are the trustee of a trust which has not yet been registered with HMRC, you are strongly advised to consider the guidance on HMRC’s website and, where necessary, to seek expert advice to check if you are caught by the new registration rules.

Legal disclaimer

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions. Before acting on any of the information contained herein, expert advice should be sought.