This article from Prudential technical team give paraplanners the chance to learn about the requirements of the TRS which became operational on 13 July 2017.
Key points covered:
- The TRS originally reflected government obligations under 4MLD. We now have 5MLD to consider
- 5MLD is effective from 6 October 2020 with regard to TRS aspects
- 5MLD extends the scope of the TRS and widens the definition of trusts required to register
- Registration deadlines apply
Money Laundering Directives
The UK government obligations under the Fourth Money Laundering Directive (4MLD) came into effect in June 2017 (see here). Amendments to Regulations implementing 5MLD came into force on 10 January 2020. However, so as to allow for further consultation, this did not include changes required to the TRS. A government consultation was launched on 24 January 2020, running to 21 February 2020 to consider the knock on changes necessary to the TRS. On 15 July 2020, the government published the main responses received and the next steps. TRS regulations under 5MLD came into force on 6 October 2020
This article initially reflects 4MLD obligations before considering the impact of 5MLD. Draft HMRC Guidance dated 22 November 2017 is also considered. There appears to be no published final guidance. This internal HMRC manual was published in May 2021 and covers off the TRS.
Background
In the past, HMRC required completion of paper Form 41G (Trust) to register a new trust. This captured important information such as the names and addresses of the trustees, details of any professional agent acting, the governing law, lifetime trust or will trust, and so on. HMRC did state however “if there is no income arising, and no likelihood of income or gains in the future, you do not need to complete this form”. This was a useful exclusion in situations where the trust fund simply comprised a non-income producing investment bond.
HMRC embraced the digital world when it recognised the UK government obligations under 4MLD. Form 41G (Trust) was therefore withdrawn and instead trusts that are required to register, do so through the TRS.
Note that trusts in place before the introduction of the TRS are also required to be registered because the new legislation expands the scope of information previously collected.
The TRS provides a single online route for trusts (and complex estates) to comply with their registration obligations and to obtain their Self-Assessment (SA) Unique Taxpayer Reference (UTR). Trusts require a UTR in order to submit the SA tax return.
A complex estate is one that does not meet the conditions for using informal payment procedures.
For the avoidance of doubt, these TRS obligations are unconnected to the obligations to complete IHT100 when lifetime transfers are made.
Registration
Under 4MLD, ‘Express’ trusts with UK liabilities were required to register whether UK or non UK resident.
The term “express trust” means a trust that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose, as opposed to a statutory, resulting or constructive trust.
The legal responsibility for registration lies with the trustees.
Where there are multiple trustees, it is a matter for the trustees to decide and appoint a lead trustee to complete the registration process. All trustees are equally legally responsible for the trust, and therefore the nominated ‘lead’ trustee is simply the main point of contact for HMRC. If, for example, there are four trustees, this would be recorded as one lead trustee and three additional trustees. The trustees can appoint an agent to complete the registration process if they so wish.
With regard to professional advisers, the TRS requires the details of the agent (if one exists) registering on behalf of the trustees. No further information on other advisers is required. In saying that, trustees should keep their own written records of any advisers being paid to provide legal, financial or tax advice in relation to the trust.
When a trust is registered for the first time, that is a new registration process. In later years the trustees will either just update the details of the existing registration or confirm that the details remain up to date and accurate.
The guidance is very detailed and therefore the following simply reflects some of the ‘highlights’ that may be particularly relevant for advisers.
