If you are a trustee of a trust, even if it was set up many years ago, or an executor of an estate that is holding a property share or investments as a trustee, it is necessary for you to consider your reporting obligations ahead of the deadline for registration on the Trust Registration Service (TRS) on 1st September 2022.
The Trust Registration Service (TRS) came into effect in 2017 following the implementation of the EU Forth Money Laundering Directive whereby certain trusts, broadly those required to pay one of the UK taxes, were required to register with HMRC for money laundering purposes.
The TRS is being extended to cover more express trusts (UK and non-UK) due to international concerns about the possible use of trusts for money laundering and terrorist financing. The increased obligations were set out in the EU’s 5th Money Laundering Directive and have been implemented by the UK in the Money Laundering and Terrorist Financing (Amendment) Regulations 2020, which amend the MLR17.
This now means that a lot of trusts, either established by clients (settlors) during their lifetime or by a Will on someone’s death, will now require registering by the registration deadline of 1st September 2022 or face penalties for late registration (trusts created on or after 4th June 2022 require to be registered within 90 days of creation)
*If the trust was in existence on 6th October 2020 but has subsequently closed down, you are still required to register and then close down the record*
Do I Have A Trust? Am I A Trustee?
A trust is created by a settlor or under a Will and is usually recorded in a written deed, declaration of trust or a Will but can also be set up automatically by law, for example on an intestacy. Most people reading this will know a trust exists and that they are a trustee or that they have created a trust (settlor) and therefore will be able to notify their trustees of the reporting requirements.
In a number of situations, it may not be appreciated by members of the public that a trust arrangement exists and that they are trustees for the purposes of this registration. The following arrangements are caught by the new Trust Registration Service extension but not be readily apparent to people they are trustees and require registering. The following list is not exhaustive but includes: –
- A share of a property is held on trust following the death of a spouse or co-owner. This may be a property share at HM Land Registry or a debt charge arrangement.
- Money invested on behalf of a minor children in stocks, shares or investments (cash deposits in banks are excluded)
- Asset protection trusts
- Family homes placed into a trust arrangement
Simply put, all UK express trusts now require registering unless they fall into a limited pool of exemptions, including:
- Pension schemes
- Charitable trusts
- Will trusts that are wound up within 2 years of death
- Policy trusts paying out on death or critical illness
- Existing trusts with a value of less than £100 created prior to 6th October 2020
*The above lists are not both exhaustive and a full list of trusts requiring registration and those exempt can be found at gov.uk
What happens if you do not register the trust with Trust Registration Service?
There is a legal obligation for Trustees to register the trusts unless exempt. If you do not register the trust and keep the details on the register up to date, HMRC enforces penalties. Currently the fixed penalties are:
- Registration made up to three months after the due date: £100 penalty
- Registration made three to six months after the due date: £200 penalty
- Registration more than six months late: either 5% of the total tax liability or £300 penalty, whichever is the greater sum.
Responsibility for registering?
The legal responsibility for registration falls on the trustees of the settlement. The trustees will either be expressly named in a trust document made during someone’s lifetime or the executors of a Will who may have become trustees of any trustees established under that Will.
A lead trustee is required to be appointed from the trustees who assumes responsibility for registration and correspondence with HMRC although all Trustees names, dates of birth and nationalities are required to be registered.
The trustees must record details about themselves, the settlor and the beneficiaries. HRMC wants an accurate picture of who is to benefit from a trust. Where a class of beneficiaries is included without any specific named beneficiaries, trustees will only need to disclose the identities of beneficiaries when they receive a financial or non financial benefit from the trust.
For a complete list of what information is needed to be included go to gov.uk
Responsibility for Updating?
The register must also be updated if the trust becomes liable for income tax or capital gains tax in the future or if there are any changes to the trustees, beneficiaries or settlors.
Future changes must be recorded on the Trust Registration Service within 90 days to avoid fines and penalties.
How do I register a trust with The Trust Registration Service?
- DIY Registration
The lead trustee can register the trust personally at gov.uk directly, having first created an organization government gateway log in ID for the trust and then registering to use HMRC’s Trust Registration Service. This information is available at gov.uk
- Professional help
Alternatively, trustees can instruct professional agents such as an accountant or solicitor who have the ability to register trusts on the TRS to assist them with the registration of the trust, normally for a fee.
Registration Deadline Recap
- Non taxable trusts in existence on or after 6th October 2020 must be registered by 1st September 2022
- Trusts set up after 4th June 2022 must be registered within 90 days
- Changes to trusts must be registered within 90 days
What Should I Do?
What is clear is that there are a number of trusts in existence, created during a lifetime or through a Will where member of the public may not instantaneously recognise that a trust is in existence that requires registering under the expanded Trust Registration Service. No doubt as the deadline looms, the Trust Registration Service may receive more press coverage and greater public awareness.
Legal firms, like ourselves, will be also be endeavoring to review records where available and write to clients who may potentially have registrations to undertake in line with requirements. Some legal firms will be more proactive in this than others but, and certainly in relation to estate administrations, records may not extend historically or be accurate enough to ensure all clients will be notified directly and law firms are not under a continue retainer and duty to their clients in certain transactions.
People should therefore seek further advice if they consider they may a trust arrangement or are unsure.
It is therefore paramount that if you consider that you may have a trust arrangement in place as either a trustee or an executor of a deceased estate leaving a property share into a trust or invested monies for minor children, that you either proceed to register the trust or take advice as to whether you have a trust requirement which requires registration before the 1st September 2022 deadline.
The expansion of the Trust Registration Service will impact on thousands of ordinary families and trusts were formalities associated with trusts after they were created were never envisaged or expected. The registration requirement may seem daunting and the fear of non compliance a real worry to many.
At Clark Willis Solicitors will be able to assist both existing client and new clients with registrations. For more information, please contact our solicitors in the Wills and Probate Team at your local office.
Please note that this article does not constitute specific legal advice to individuals or organisations and is intended as an introductory legal guide to the TRS only. Full details about the Trust Registration Service are available on the government website and Clark Willis Solicitors accept no liability for any inaction or action caused on the basis of the contents of this article without specific legal advice being sort relating to someone’s specific circumstances