Charlene Young, senior technical consultant at AJ Bell, walks us through the Trust Registration Service and in particular, three things you need to know – who must register, by when and what trusts might be exempt from the requirement.
The Trust Registration Service (TRS) was set up in 2017 as a register of the beneficial ownership of trusts. There have been a number of changes in terms of which trusts must register, and by when, since its introduction.
Who must register?
Initially, trustees were only required to register on TRS if the trust had a liability to tax (for example income or capital gains). However, new rules introduced by the Fifth Anti-Money Laundering Directive (5MLD) have extended the requirement to register to all UK express trusts in future, not just those with a tax liability under the current rules.
An estate for a deceased individual will use the Trust Registration Service (TRS) if the deceased’s personal representatives need to complete a Trust & Estate return for the period of administration.
Is there a deadline?
The changes introduced by 5MLD originally required existing UK express trusts (that were not specifically exempt) to register on TRS by 10 March 2022. An express trust is a trust deliberately created by a settlor either in their lifetime, or upon their death, via a will.
Significant development to the TRS system itself is required to allow for the expansion as it is not currently possible to register a trust without a tax liability. This work was scheduled to complete in March 2021, with a 12-month period for existing trusts to register before the new deadline.
HMRC has confirmed in a statement that the system development will not be completed until Autumn 2021 and consequently, the registration deadline will be 12 months after this date of completion, so late 2022 for existing trusts that are not already compelled to register.
New trusts established after the late 2022 deadline will have 30 days to register. All registered trusts will then have 30 days from any changes to update their details. Such a change would be a change in beneficial ownership, for example.
Are there exemptions?
The UK regulations exclude certain types of trust from the expanded registration requirements. This is because these trusts can be considered a lower risk of money laundering or terrorist financing due to other registration and regulatory requirements.
Notably, there are no specific exemptions for bare trusts generally, nor a trust that holds an investment bond.
Express trusts may be exempt if they are:
- UK registered pension schemes (registered under Part 4 Finance Act 2004).
- UK registered charitable trusts
- A trust created by a will that holds only property from the estate of the deceased person is excluded for a period of two years from the date of death.
- Trusts for bereaved minors that meet the conditions of s71A of the Inheritance Tax Act 1984.
- Age 18-to-25 trusts that meet the conditions of section 71D of the Inheritance Tax Act 1984
- Trusts created under the intestacy rules. These are not express trusts in any event.
- Trusts where a disabled person is the (only) beneficiary
- Certain existing pilot trusts – those that existed before 6 October 2020 and that are holding assets valued at less than £100.
- Trusts arising from personal injury payment. These trusts must also be disregarded from capital under regulation 46(2) of, and paragraph 12 of Schedule 10 to, the Income Support (General) Regulations 1987.
- Legislative trusts – for example on bankruptcy.
- Trusts which are created by, or in order to satisfy the terms of, an order of a court or tribunal
- Employee share scheme trusts that are either the plan trust of a share incentive plan (SIP) or a trust created under a share option scheme that meet the requirements under Schedules 2 and 3 of the Income Tax (Earnings and Pensions) Act 2003.
There are also exemptions available for trusts holding life insurance or retirement policies that only pay out on death, terminal illness or critical illness. Where a trust holds any other non-insurance assets, the exclusion does not apply.
A trust would continue to be excluded from registration and after a claim for two years following the date of death of the life assured. If by the end of this period the funds have not yet been distributed to the beneficiaries, the trust is from that point required to register on TRS.
HMRC has published a new Trust Registration Service Manual (TRSM) which will be updated with confirmed registration deadlines, once the work to incorporate the additional types of trusts is complete.
