The Trust Registration Service (“TRS”) was created by HM Revenue Customs in 2017 to create a register of trusts in the UK.
Until recently trusts were only required to register with TRS if it was liable to one of the UK taxes (e.g. income tax or inheritance tax).
Under the EU’s Money Laundering Directives (5MLD), however, all “trust arrangements” must now register by 1 September 2022 regardless of whether they will have any UK tax liability.
Aside from the trusts that perhaps hold land/buildings or bonds that didn’t previously need to register, this broadened definition will capture a lot of arrangements that are not “trusts” in the classic sense. It may include certain arrangements put in place during land or commercial transactions or those to assist with tax planning on purchases or sales.
What “Trust Arrangements” Need to Register?
A “trust arrangement” is, essentially, where the parties who hold legal title (to assets, rights or obligations) are not the same as the parties who have the underlying ownership. This is what we call a “bare trust arrangement”.
These must register if: (1) they are express (i.e. in writing), (2) there was an intention to create such an arrangement, and (3) they don’t fall within one of the exclusions.
The rules have been in place since 6 October 2020 and any “trust arrangement” in existence on or after that date (regardless of whether it has since come to an end) must register.
Unfortunately, HMRC only opened the portal for registration in September 2021 and their guidance is continuing to be updated and, as such the exemptions will continue to evolve.
The deadlines for registration are:-
- 1 September 2022 to register trust arrangements created before that date; or
- Within 90 days of creation for any non-taxable trust created after 1 September 2022
Duty to Register
The duty to register is on the “trustees”. For arrangements that don’t specifically name trustees, this will be the person(s) or entity that holds the legal title.
Penalties may be payable for failure to register. However, HMRC have not yet confirmed how penalties will be calculated or on what basis they will be applied.
What Trusts are Exempt?
The legislation lists 23 different exemptions. Some key ones to be aware of are:-
- “Pension Trusts” – provided they fall within certain legislative requirements
- “Policy Trusts” – provided the policy only pays out on death, critical/terminal illness or to cover health costs for the life assured (we await clarification on early surrenders)
- “Charitable Trusts” – if registered as a charity & have no other requirement to register
- “Trusts on Death” – either under a Will or for death benefits if wound up within 2 years
- “Co Ownership Trusts” – to record shares held in jointly owned property
- “Commercial Transaction Trusts” – where created as part of a commercial transaction to facilitate the transaction to proceed or to protect rights as part of it – provided the trust arrangement is incidental to the transaction and has no distinct trust purpose
- “Bereaved Minor Trusts” or “18 to 25 Trusts” – these are specific trusts that have inheritance tax benefits and must meet the conditions in that legislation
- “Personal Injury Trusts” – for sums received in consequence of a personal injury
- “Trusts for Disabled Beneficiaries” – which meet the requirements
For advice or assistance on Trust Registration for you or trusts you are involved with, please contact us on: