27 October 2021
The scope of UK connected trusts that need to register with the trust registration service (TRS) has been extended. Many more trust arrangements will be affected, potentially creating significant additional compliance obligations for trustees.
Questions around the TRS changes
Who does this apply to?
The TRS has been extended and the following types of trusts will also need to register with HMRC:
- All UK resident express trusts (an express trust is a trust that is created knowingly and intentionally – it can include ‘bare trusts’ and trusts without a trust deed);
- Non-UK resident express trusts that acquire UK land or property on or after 6 October 2020; and
- Non-UK resident express trusts that enter a new business relationship with a UK obliged entity (professional service providers as defined by the anti-money laundering rules) on or after 6 October 2020. For example, a non-UK resident trust receiving services such as banking, accountancy or legal advice on an ongoing basis from an obliged entity in the UK.
While some narrow exemptions do apply, the exemptions are not applicable to trusts with a UK tax liability. Trusts that have income tax to pay of £100 or less on interest only, bare trusts and trusts where only the settlor or beneficiary has to pay tax are also required to register. The 5th Anti-Money Laundering Directive represents a significant extension of scope for the trust register. Therefore, we recommend that all trust arrangements are checked to determine whether the trust needs to be registered.
What does this mean for trustees?
Trustees who are required to register one or more trusts will need to ensure they have the required information for every beneficial owner, and that it is accurate and up to date.
Beneficial owners are:
- the settlor(s);
- the trustees;
- named beneficiaries (including those referred to as a potential beneficiary in a letter of wishes or similar document relating to the trust from the settlor);
- classes of unnamed beneficiaries;
- unnamed beneficiaries who have received distributions from the trust; and
- any individual who has control over the trust.
An individual will be treated as having control if (alone or with others) they have: the power to add or remove beneficiaries, appoint or remove trustees or give another individual control over the trust; power over trust property; the power to direct, withhold consent to or veto trust distributions; or the power to make amendments to or terminate the trust.
What information is required?
For non-taxable trusts, which now need to be registered, trustees are required to maintain accurate, up to date details for each beneficial owner of the trust and the lead trustee. This includes personal details such as dates of birth, tax references, and in some cases passport details.
Taxable trusts are also required to provide more information relating to the financial affairs of the trust, including details of the trust’s settlor and trust assets.
How do you file with HMRC?
Information required for the trust register needs to be submitted online using the TRS, with any changes to the details held on the register submitted as updates.
It is the trustees’ responsibility to ensure that the trust register is kept accurate and up to date. The trustees can appoint an agent to register and maintain the trust details on their behalf by giving their authority to HMRC.
When do you need to do this?
All non-taxable trusts, that are in existence on or after 6 October 2020, other than those specifically exempt, need to register by 1 September 2022. Non-taxable trusts created after 1 September 2022 or that no longer qualify for an exemption must register within 90 days. For trusts that are already registered, the register will need to be updated so that it is accurate and up to date on the deadline date or within 90 days of the change if this is later.
Trustees of taxable trusts are also required to submit an annual declaration by 31 January following the tax year in which the tax liability was incurred. This annual declaration must either update the details held on the trust register or confirm that no changes need to be made.
What is the trust register used for?
The new rules will allow HMRC to provide information to an outside party in specific limited circumstances. In addition, trustees will use the register to share their own information with obliged entities (such as solicitors or financial services firms).
What are the penalties for failing to comply?
If trustees fail to maintain an accurate and up-to-date record of beneficial owners, or provide HMRC with the required information, HMRC currently imposes a penalty of £100 for each missed deadline, with additional penalties levied for continued delays. HMRC could also pursue criminal proceedings if a money-laundering offence has occurred.
Does this impact offshore trusts?
Offshore trusts are impacted and required to register as per the criteria outlined above. In particular, offshore trusts that acquire UK land or property or enter into a new business relationship with a UK obliged entity from the 6 October 2020 will be required to register unless an exemption applies.
How can RSM help?
RSM can help you with all aspects of a trust’s beneficial ownership register, including, but not limited to:
- preparing and submitting the initial registration to HMRC on behalf of the trustees;
- updating and maintaining trust registrations; and
- providing information and assistance to help trustees comply with their obligations.
For more information about reporting of beneficial owners and trust assets and the services we can offer you can watch our video or read our guides below. speak to Joan Foster or Heather Pendlebury.