The UK’s Trust Registration Service or TRS was first introduced in 2017 in compliance with the EU’s Fourth Money Laundering Directive. Initially, only express trusts with UK tax liabilities were required to register with the TRS and provide certain information on their settlors, beneficiaries, power holders and assets.
However, the Fifth Money Laundering Directive (5MLD), implemented by the UK in 2020, expanded the scope of the TRS, meaning that a significantly wider range of trusts are now required to register. In particular, the TRS now applies to:
- all UK express trusts (regardless of whether they have UK tax liabilities);
- non-UK trusts with UK assets plus UK tax liabilities;
- non-UK trusts – with at least one UK resident trustee – which enter into a ‘business relationship’ in the UK after 6 October 2020; and
- non-UK trusts which acquire UK land after 6 October 2020.
There are various exemptions to these rules, with certain categories of trusts excluded from the registration requirements. For example, charitable trusts, life insurance trusts, co-ownership property trusts, pension scheme trusts, trusts imposed by a court order (e.g. on divorce) and certain trusts arising on death are generally exempt if they meet various conditions and unless they have UK tax liabilities.
Certain types of bare trust or nominee arrangements may also qualify for an exemption. For instance, a bare trust established in the context of commercial transactions might not be required to register. It has also been confirmed recently that Junior ISAs and bank accounts opened by a parent on behalf of their minor child are excluded from the registration requirements. However, there is no general exemption for bare trusts so, for example, where parents purchase a property to hold as bare trustees for the benefit of their children rather than for themselves, the trust would not be excluded from registration.
HMRC’s TRS Manual was first published in May 2021; however, it has undergone multiple updates since then to clarify the precise ambit of the rules. Despite this, the way in which the rules and the current mechanics of the registration portal apply in certain circumstances can lead to illogical results in practice.
The deadline for registering most trusts which are being brought into the scope of the TRS rules by 5MLD is now 1 September 2022. Given the wide scope of the new rules and the fact that official guidance is continuing to evolve (and remains unclear on certain issues), trustees (including bare trustees/nominees) would be well advised to examine their arrangements as soon as possible and to take advice, where necessary, to ensure compliance with the regime and the 1 September deadline.
Given the importance of the Trust Register and the approach of the deadline, my next post will consider the position of non-taxable trusts in a little more detail. In the meantime, HMRC’s TRS Manual may be found at:
28 May 2022