26 November 2021
To comply with international money-laundering obligations, UK adopted new rules that require UK and some non-UK trusts to be registered on HMRC's Trust Registration Service (TRS).
The TRS provides a single online route for trusts to comply with their registration obligations and to obtain, if necessary, their Self-Assessment (SA) Unique Taxpayer Reference (UTR) number.
Background
As a result of the UK’s adoption of the EU’s Fifth Money Laundering Directive (5MLD), all UK express trusts, even if they do not pay UK tax, must now be registered, unless they are specifically excluded – either because they fall within the list of excluded express trusts, or because they are registered elsewhere in the European Economic Area.
The regulations which brought non-taxable trusts into the scope of the Trust Register came into force on 6 October 2020, and it took time for HMRC (HM Revenue & Customs) to upgrade the existing TRS to consider recent changes.
The register had been open for the registration of non-taxable trusts on 1 September 2021.
Covered trusts
According to new regulations express, i.e., written, trusts must be registered even if there is no tax due or return to submit. Subject to exemptions, this is the case for all UK trusts.
After 6 October 2020, it is also necessary to register non-UK trusts if they have significant links to the UK. For example, they own UK land, have a business relationship with someone in the UK, or their trust accounts are completed here. If there is a taxable event (express, exempted or otherwise), then the registration is compulsory no matter of the rules above.
Exemptions
Some trusts are excluded from the compulsory registration, provided no taxable events occur. For example, the following trusts are exempted: charities, pensions, some will trusts (generally if less than two years old or that do not have assets transferred to them), bank accounts held for a child, life insurance or personal injury trusts (however, subject to certain limits), some jointly held property, and pilot trusts that hold less than £100 and were set up before 6 October 2020 (without further assets added). It should be noted that there is no general exemption for bare trusts.
Deadlines for registration of non-taxable trusts
The relevant deadlines are as follows:
non-taxable trusts existed on or after 6 October 2020 must be registered by 01 September 2022
non-taxable trusts created after 1 September 2022 within 90 days
changes to the trust details and/or circumstances, within 90 days of the change
A thorough review of any existing but not yet registered trusts is required. The biggest challenge for non-taxable trusts is to identify the trusts in scope, especially where the trustees are laypersons who have not had any professional advice, so their trusts are not within any professional adviser’s radar.
If you have any questions on the registration of non-taxable trusts, our experts can assist with any queries.
For further information on any points above, please contact:
Kseniya Devlekanova at kseniya@lexefiscal.com , or
Dr. Frank J Clifford at clifford.frank@lexefiscal.com.