The Trust Registration Service: What do I need to know about its regulatory changes?
Client Director, Will Buckley examines the technical side of the upcoming regulatory changes affecting trusts and how this may affect you.
Trust Registration Service: New Regulations
As part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), the requirement for trustees to register on the Trust Registration Service (TRS) has recently been enlarged to include some, but not all non-UK Express Trusts. All UK express trust will have to register, unless they are specifically excluded.
An ‘Express Trust’ is one that is deliberately created by a settlor and set up by deed, as opposed to a trust which arises automatically by operation of law (e.g. a Statutory Trust).
The new rules were introduced on 6th October 2020. On 25th January 2021 HMRC published an overview of the changes which explains in broad terms which additional trusts will need to register by 10th March 2022.
However, due to delays with the implementation of the TRS, the HMRC has just announced that this deadline is likely to be extended to 12 months after the final delivery of the upgraded TRS. We will now have to wait for further information on the deadline for registering from HMRC. The deadline is likely to be extended to sometime in the summer of 2022.
I set up a Bare Trust for my grandchildren last year, do I have to register?
Yes, you will need to register. At the moment it is not yet possible to register non-taxpaying trusts on the TRS. The government is currently updating its systems to allow this to happen and further guidance will be released this year. At which point, the information will need to be provided (previously by 10th March 2022) within 12 months following the completion of the updated TRS. Further information will follow from HMRC.
Any new trusts coming into existence after 9th February 2022 will be required to register with the TRS within 30 days of establishment. Also, trustees will have 30 days from when they are aware of any changes to update the details.
The HMRC will initially issue “nudge letters” and later penalties where trustees fail to comply with this requirement.
What details will HMRC need from me?
Where the trust has no tax liability, the trustees will only need to provide basic information on the beneficial owners of the trust that is both the settlors and beneficiaries. This will include full name; date of birth; country of residence; nationality and relevant role within the trust.
Further, a decision will need to be made on who will be appointed as the lead trustee. Going forward the lead trustee will need to update the trust register, with any changes, within 30 days from when they become aware of the change.
How do I do this?
When registering the trust you’ll need to have registered online as an agent with HMRC, by creating an agent services account and then use this agent services account Government Gateway user ID and password to add or update information.
I have a Pension in a Master Trust, do I have to register with the Trust Registration Service?
No, you will not need to register.
In general, UK registered pension trusts will be exempt from registration. Master trusts are pension schemes that are designed for multiple employers under a single trust arrangement.
I have a Life Insurance policy that pays out benefits into a trust, will I have to register with the Trust Registration Service?
No, as long as the conditions are met. Trusts used to hold a life insurance policy, income protection policy, or retirement benefits if the policy only pays out on death, terminal illness or permanent disablement, or to meet the healthcare costs of the person assured and does not have a surrender value are exempt from this legislation.
Trusts holding insurance policy benefits are exempt providing the benefits are paid out within 2 years of the death of the person assured.
I plan to set up a Discretionary Trust with funds invested via an Offshore Single Premium Investment Bond. Do I have to register?
Yes. Trusts holding single premium life insurance and capital redemption bonds are not exempt and will need to register. There is a life policy exemption but this only relates to pure life policies, as above.
There remains a requirement under the 5th Money Laundering Directive to register if the trust incurs a tax liability for income tax, capital gains tax, inheritance tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax and Land and Buildings Transaction Tax (in Scotland).
For trusts that are not taxable relevant trusts but that fall within terms of the expanded rules before 9 February 2022, the information must be provided (previously by 10th March 2022) within 12 months following the completion of the updated TRS. Further information will follow from HMRC.
Trusts having a UK tax event prior to 9 February 2022 will still need to make sure they register by 31 January following the first tax year they become subject to a UK tax charge. Following 9 February 2022, any trusts having a UK tax event will also need to register within 30 days.
What details will HMRC need from me?
This depends on if the trust is liable to tax or not. For those trusts which are not liable to tax, the trustees or agents will have to give some basic information about the trustees, settlors and beneficiaries (the ‘beneficial owners’).
For individuals this is their full name, date of birth, country of residence, nationality and role in the trust. For companies and other legal entities this is their corporate or firm name, registered or principal office address and their role in the trust.
If the value gifted into trust, together with any other chargeable transfers in the previous seven years, does not exceed the Nil Rate Band there will be no lifetime transfer chargeable to Inheritance tax at the time that it is made. This trust will not be liable to tax so only basic information will need to be provided. However, when the trust become liable for tax, the trustees or agents will have to give some additional information about the trust and the beneficial owners. This could to happen at the time the trustees need to file a periodic (10 year) return. At this time the trust will likely become liable to tax if the assets are valued in excess of the Nil Rate Band.
If you have any questions relating trusts please contact us here to arrange an appointment.
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