Matters of Trust

The HMRC Trust Registration Service (TRS)

In June 2017, HMRC created the TRS to comply with the EU 4th Money Laundering Directive. Since then, trustees of express trusts with a UK tax liability have been required to register certain information about the trust on the TRS.

An express trust is created deliberately by clear intention of the settlor. Relevant UK tax liabilities are income tax, capital gains tax, inheritance tax or stamp duty land tax. Non-UK resident express trusts with a liability to UK tax must also register.

Where are we now?

If a trust has been required to submit a UK return for self-assessment, IHT or SDLT since 6 April 2017, registration should already have been completed.

What is changing?

On 10 January 2020, the EU 5th Money Laundering Directive came into effect and, although the UK is no longer an EU member state, we are bound by this legislation.

The impact of 5MLD on the TRS is that it widens the scope of registration. HMRC are currently finalising the exact criteria but once these have been defined and embedded in UK law by statutory instrument, all UK express trusts will be required to register irrespective of whether they have a UK tax liability. Non-UK resident express trusts holding land or property will also need to register on the TRS.

This change is of significance where income arising within a life interest settlement is mandated directly to the life tenant. Legal responsibility for payment of the related income tax rests with the beneficiary and unless Trustees have been required to report capital gains tax, inheritance tax or SDLT since 6 April 2017, there will have been no requirement to register the trust. Under 5MLD this will change.

There are a number of exemptions, which will be confirmed by HMRC in due course. These include charitable trusts, statutory trusts, will trusts wound up within 2 years of death, trusts for bereaved minors and vulnerable beneficiaries and trusts holding assets valued at less than £100.

Unfortunately HMRC have not yet confirmed if bare trusts will fall outside of scope, although professional bodies are pressing this point.

What should you do now?

To date HMRC have not issued penalties for non-compliance. However, in the future it will be necessary to register new trusts within 30 days of creation and make any updates within 30 days of the event. We would therefore urge Trustees to bring their registration responsibilities up to date and keep ahead of the game.

Once this area has been legislated, we will provide details of the definitive criteria. In the meantime, please contact us if:

you are a Trustee:

  • of a trust which should have been registered under 4MLD but this has not been done
  • of a mandated life interest trust which has not yet been registered
  • of a pilot trust which holds assets valued at more than £100
  • and are unsure whether the trust falls under either of the 4MLD or 5MLD registration requirements

you are a solicitor and would like advice on any trusts in your portfolio.

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