Trust Registration Service | Do you need to register your trust?

HM Revenue and Customs (HMRC) first introduced the Trust Registration Service in June 2017 in response to the UK government’s obligations under the Fourth Money Laundering Directive (4MLD).  This was originally brought in to help combat money laundering and to aid tax transparency. 

The 4MLD required that all express trusts (i.e., where a trust was deliberately created by a settlor in writing) with a tax liability in a given tax year needed to register on the TRS.  The information to provide on the TRS includes settlor, trustees and beneficiary details and assets of the trust.  The taxes covered are:

• Income tax
• Capital gains tax
• Inheritance tax
• Stamp Duty Land Tax
• Stamp Duty Reserve Tax (England and Northern Ireland), Land and Buildings Transaction Tax (Scotland) and Land Transaction Tax (Wales)

Registration deadlines

HMRC set a deadline for all existing ‘taxable’ trusts (for example those already registered for Self Assessment completing annual trust tax returns) to register on the TRS and that deadline has since passed.  It is therefore important to register now if you, as a trustee, have not done so already. 

For trusts not registered for Self Assessment, the deadline for registering will depend on the circumstances involved:

• Where the trustees incur an Income Tax or a Capital Gains Tax liability for the first time in a given tax year, then the registration deadline is 5 October after the end of that tax year
• Where the trustees incur either an Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, a Land and Buildings Transaction Tax (Scotland) or a Land Transaction Tax (Wales) liability in that tax year, then the registration deadline is 31 January after the end of that tax year

For those trusts that complete annual tax returns, the trustee, or their agent, will need to keep the Trust Register up to date (with changes of trustees, addresses, beneficiaries etc.) and confirm online to HMRC that this has been done, or confirm that no changes have arisen during the tax year.

What’s new?

The Fifth Money Laundering Directive (5MLD) has since been implemented and new rules introduced from 6 October 2020 extend the scope of the trust register to all UK and some non-UK trusts that are currently open, i.e., removes the need for the trust to be ‘taxable’.  As a result, this brings many non-taxable express trusts into the scope of needing to register on the TRS. 

The deadline for registering these trusts via the TRS is 1 September 2022.

Which trusts do not need to register?

The good news is that 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
• 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 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 2 years of the death
• Charitable trusts which are registered as a charity in the UK or which are not required to register as a charity
• ‘Pilot’ trusts which were set up before 6 October 2020 and which hold no more than £100 – pilot trusts set up after 6 October 2020 will need to register
• Co-ownership trusts set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’
• Will trusts which are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to 2 years after the person’s death
• Trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme
• ‘Financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets

Trusts which are not set up deliberately by a settlor but are imposed by Courts or created by legislation, are not ‘express trusts’ and therefore do not have to register unless they are liable to tax. Examples of such trusts include a trust:

• Set up under the intestacy laws when a person dies without a valid will and the assets in the estate are held by a trust before passing to relatives
• Set up under a Court Order to hold compensation payments
• To hold jointly owned assets, such as a home jointly owned with a spouse, partner or relation as ‘joint tenants’, or a joint bank account

Next steps

If you have any form of trust structure and need assistance to understand if the trust needs to register under the TRS rules then please contact us.  Due to the complexity of the rules, we can give confirmation of the correct position and assist with registering the trust on your behalf if required.