The M&G Technical Team outline what constitutes an Express Trusts and the regulation of these and other trusts under the Trust Registration Service (TRS) under 4MLD and 5MLD.
This is an extract from the full more detailed article which can be found HERE
Under the Fourth Money Laundering Directive (4MLD), ‘Express’ trusts with UK liabilities are required to register whether UK or non UK resident. As detailed below, Fifth Money Laundering Directive (5MLD) removes this link with taxation and widens the definition of trusts required to register.
‘Express’ trust
This is a trust created deliberately by a settlor, usually (but not always) in the form of a document such as a written deed or declaration of trust. Most trusts are express trusts. For example, think of a standard insurance company lifetime trust. However, an express trust need not be created only during the settlor’s lifetime but also can be created by will, to take effect on death.
Express trusts can be contrasted with trusts that come into being through the operation of the law and do not result from the clear intent or decision of a settlor to create a trust or similar legal arrangement (for example, implied or constructive trusts).
In addition, a statutory trust is not an express trust. This is a trust set up automatically under the terms of legislation. For example, in England and Wales the laws of intestacy provide for assets to be held in trust where the deceased dies without a will and leaves a surviving spouse and children.
Although not covered in the guidance, trust held policies effected under the Married Women’s Property Act would seem to fall within the definition of an express trust due to the clear intent of the settlor.
Trusts that are not express trusts are not required to register as registrable express trusts but may have to register for tax purposes if they have a UK tax liability in order to obtain a UTR number.
The legal responsibility for registration and updates 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 (see later section).
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, in the case of a taxable trust, confirm that the details remain up to date and accurate.
Trusts that need to be registered under 4MLD and 5MLD
We know from above that under 4MLD, ‘Express’ trusts with UK tax liabilities are required to register whether UK or non UK resident. These are “registerable taxable trusts”.
The UK taxes in scope are
- Income Tax
- Capital Gains Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax and (in Scotland) Land and Buildings Transaction Tax
- Land transaction tax (Wales)
We also know from above that 5MLD removed the link with taxation and widened the definition of trusts required to register. Accordingly, we now have “registerable express trusts”.
All UK express trusts, and some non-UK express trusts, are required to register unless explicitly excluded from registration as an ‘excluded express trust’
Just to be clear, trusts now needing registered fall into 3 broad categories.
- All UK express trusts, unless they’re specifically excluded as an excluded express trusts (see later).
- Certain non UK express trusts if they have links to the UK, such as having UK-based trustees, acquiring land in the UK, or entering into a business relationship with a UK business
- Non-express trusts and specifically excluded express trusts which have a tax liability – it makes sense that these trusts need to be registered on the TRS for Self-Assessment purposes. So basically what the government is saying is that non express trusts and excluded express trusts carry a low money laundering risk but if they have a tax liability then still need to register to get them on the Self-Assessment system. Remember that the TRS is the online route for trusts to obtain their Self-Assessment UTR which is required to submit the Self-Assessment tax return.
Note that Bare trusts (originally not needing registered) now need to be registered – the carve out that existed for them under 4MLD has been removed under 5MLD. There is also no carve out for trusts (bare and non-bare) holding a non-income producing investment bond.
