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Update on the Trust Registration Service

The Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. It was established in 2017 as part of the UK's implementation of the Fourth Money Laundering Directive which introduced the requirement for certain trusts with a UK tax liability to register on the TRS and provide specific information to HMRC.
12th July, 2022

The Fifth Money Laundering Directive regulations, which came into effect on October 6, 2020 significantly extended the scope of the TRS to all UK express trusts (with a few exceptions) and some non-UK trusts, irrespective of whether the trust has a tax liability, to register with HMRC.

Trusts that need to be registered

There are certain requirements which need to be met in respect of trusts that require registration with the TRS. These are broadly:

  • all UK express trusts unless specifically excluded (an express trust is one which is deliberately created by a settlor)
  • non-UK express trusts which acquire land or property in the UK
  • non-UK express trusts which have at least one trustee resident in the UK and enter into a 'business relationship' with an obliged entity in the UK (e.g., a financial institution, accountant, tax adviser, legal professional, etc)
  • trusts which have a tax liability including those highlighted in the exclusion list (see below).
Trusts that do not need to be registered

Certain trusts do not need to register unless they are liable to pay UK tax. Examples of these include:

  • trusts used to hold money or assets of a UK-registered pension scheme such as an occupational pension scheme
  • 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 health care costs of the person assured
  • trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within two years of the death
  • charitable trusts
  • 'pilot' trusts which were set up before October 6, 2020 and which hold no more than £100, pilot trusts set up after October 6, 2020 will need to register
  • co-ownership trusts set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as 'tenants in common'
  • will trusts providing they only hold the estate assets for up to two years after death
  • trusts for bereaved children minors or adults aged 18 to 25-years-old
  • 'financial' or 'commercial' trusts created in the course of professional services or business transactions for holding client money or other assets.

Other less common types of express trusts which are set up for particular purposes are also excluded from registration unless they have to be registered because they are liable to pay tax. These are set out in the legislation and will be described in the detailed guidance.

Information held on the register

The trustees or agents will have to register information about the persons involved in the trust such as the settlors and beneficiaries.

The information provided about each beneficial owner will be their name, month and year of birth, country of residence, nationality, and their role in the trust. For companies and other legal entities, the information will be limited to their name, registered office address and nature of their role in the trust.

How will this information be accessed and shared?

Under the new rules, organisations and persons involved in preventative work in the field of anti-money laundering, counter terrorist financing and associated offences can request access to details on the register about the people associated with a trust. The information will only be released on request in certain limited circumstances.

Law enforcement agencies can already obtain information on the register about a trust and its beneficial owners to help counter money laundering and terrorist financing. The new rules will allow HMRC to give information to an outside party in specific limited circumstances. In addition, trustees will use the register to share their own information with an obliged entity.

There are two types of requests for information from the register:

  • Legitimate interest requests – individuals and organisations who have an interest in a specified trust because they are, for example, investigating suspected money laundering or terrorist financing activity involving that trust may apply for information from the register. Applicants will have to give details which substantiate why they suspect that the trust may have been used for money laundering or terrorist financing and explain how they will use the trust data.
  • Third country entity requests – individuals and organisations may apply for information on the register about a trust which holds a controlling interest in a non-EEA ('third country') company or other legal entity. A 'controlling interest' is usually where the trust holds more than 50 per cent of the shares in the entity or can control it in some other way.

HMRC will not give information about beneficial owners if they are under 18 years of age, lack mental capacity or are at risk of blackmail, extortion, violence, or intimidation as a result of releasing that information.

Timescales for registration

The registration deadline depends on when the trust was created and whether the trust needs to be registered due to it being taxable (i.e., there is a UK tax event chargeable against the trust) or non-taxable.

Registrable non-taxable express trusts that were in existence on or after October 6, 2020 must register by September 1, 2022. This includes trusts that were in existence on or after October 6, 2020 but have since ceased.

Deadlines for notification of changes

The TRS record must be kept up to date and information must be updated within 90 days of the date that the trustees become aware of changes to the trust details or beneficial ownership.

If the trust is taxable, the trustees must declare the trust is up to date on an annual basis by January 31 following the end of the tax year in which the trust has a liability to UK tax.

Non-compliance

The penalty regime is expected to be similar to that for self-assessment commencing at £100 and increasing the longer the failure continues, although this has yet to be confirmed by HMRC.

Next steps

For any trusts which are caught by the newly introduced regime, we will be in touch in the coming weeks to confirm the position and arrange for the relevant information to be submitted on the TRS where we provide trustee services.

The content of this document is intended to provide a general overview of the subject matter and should not be construed as legal advice.