Trust Registration Service (TRS)
Learn about the requirements of the TRS which became operational on 13 July 2017.
- The TRS currently reflects government obligations under 4MLD
- 5MLD is effective from 10 January 2020 with regard to customer due diligence aspects
- 5MLD requires changes to the TRS and HMRC has issued consultation on this
- Under 4MLD ‘Express’ trusts with UK liabilities are required to register whether UK or non UK resident
- Under 4MLD there are no TRS obligations for trustees of a bare trust as no UK tax liability arises at trust level
- Registration deadlines apply
Money Laundering Directives
The UK government obligations under the Fourth Money Laundering Directive (4MLD) came into effect in June 2017. Amendments to Regulations implementing 5MLD came into force on 10 January 2020. However, so as to allow for further consultation, this did not include changes required to the TRS. A government consultation was launched on 24 January 2020, running to 21 February 2020 to consider the knock on changes necessary to the TRS.
The article reflects 4MLD obligations (though see the 5MLD section at the end) and Draft HMRC Guidance dated 22 November 2017. There appears to be no published final guidance. The legislation is set out here
In the past, HMRC required completion of paper Form 41G (Trust) to register a new trust. This captured important information such as the names and addresses of the trustees, details of any professional agent acting, the governing law, lifetime trust or will trust, and so on. HMRC did state however “if there is no income arising, and no likelihood of income or gains in the future, you do not need to complete this form”. This was a useful exclusion in situations where the trust fund simply comprised a non- income producing investment bond.
HMRC has now embraced the digital world and recognised the UK government obligations under 4MLD. Form 41G (Trust) has therefore been withdrawn and instead trusts that are required to register, do so through the TRS.
Note that trusts in place before the introduction of the TRS are also required to be registered because the new legislation expands the scope of information previously collected.
The TRS provides a single online route for trusts (and complex estates) to comply with their registration obligations and to obtain their Self-Assessment (SA) Unique Taxpayer Reference (UTR). Trusts require a UTR in order to submit the SA tax return.
A complex estate is one that does not meet the conditions for using informal payment procedures.
For the avoidance of doubt, these TRS obligations are unconnected to the obligations to complete IHT100 when lifetime transfers are made.
‘Express’ trusts with UK liabilities are required to register whether UK or non UK resident.
The term “express trust” means a trust that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose, as opposed to a statutory, resulting or constructive trust.
The legal responsibility for registration lies with the trustees.
Where there are multiple trustees, it is a matter for the trustees to decide and appoint a lead trustee to complete the registration process. All trustees are equally legally responsible for the trust, and therefore the nominated ‘lead’ trustee is simply the main point of contact for HMRC. If, for example, there are four trustees, this would be recorded as one lead trustee and three additional trustees. The trustees can appoint an agent to complete the registration process if they so wish.
With regard to professional advisers, the TRS requires the details of the agent (if one exists) registering on behalf of the trustees. No further information on other advisers is required. In saying that, trustees should keep their own written records of any advisers being paid to provide legal, financial or tax advice in relation to the trust.
When a trust is registered for the first time, that is a new registration process. In later years the trustees will either just update the details of the existing registration or confirm that the details remain up to date and accurate.
Note that the data on the Register is not available to the public. It can only be shared by HMRC with law enforcement authorities in the UK or in another EEA member state if requested.
The guidance is very detailed and therefore the following simply reflects some of the ‘highlights’ that may be particularly relevant for advisers.
UK trusts that need to use the TRS
An ‘express trust’ where the trustees have incurred a liability, in a given tax year, to pay any of these UK taxes
- Income Tax
- Capital Gains Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax and (in Scotland) Land and Buildings Transaction Tax
UK trusts that do not need to use the TRS
Trusts which do not need to register include those falling under these circumstances
- the trustees do not need to file a tax return and have not incurred a UK tax liability
- the settlor or a beneficiary of the trust has incurred the UK tax liability but the trustees are not liable
- the trustees of a bare trust as no UK tax liability arises at trust level
- where all income is received directly by the UK resident beneficiary and not reported on the trustees’ tax return (unless they have another UK tax liability such as capital gains tax)
- the trustees of a charitable trust will not have to register until they incur a UK tax liability
- a statutory trust
- the trust has no other UK tax liability other than a tax liability of less than £100 on bank or building society interest income
With regard to the first bullet, a discretionary trust holding a non- income producing investment bond springs to mind (assuming also no IHT liabilities). Remember however that UK resident trustees may become taxable if a chargeable event gain subsequently arises and the settlor cannot be taxed because he/she died in an earlier tax year or is non UK resident. For example if the bond is held in a discretionary will trust then the trustees will need to register if a chargeable event gain occurs. If a UK resident settlor is taxable albeit that he/she may recover the tax from the trustees, then that situation seems to fall under the second bullet point.
Deadlines for registration
This depends on whether the trust is already registered for Self-Assessment (SA) for Income Tax or Capital Gains Tax.
Trust already registered for SA
- Where the trustees incur a UK tax liability in a given tax year, then the registration deadline is 31 January after the end of that tax year.
Trust not registered for SA
- Where the trustees incur an Income Tax or a Capital Gains Tax liability for the first time in a given tax year, then the registration deadline is 5 October after the end of that tax year in order to give enough time to issue the UTR.
Trust not registered for SA
- Where the trustees incur either an Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, or a Land and Buildings Transaction Tax (Scotland) liability in that tax year, then the registration deadline is 31 January after the end of that tax year.
Information required by the TRS
Details of the trust assets, including addresses of UK properties, and a market valuation of assets held at the date that the assets were settled. The TRS only collects information on the values at the initial registration.
In addition, the identity of the settlor, trustees, any person exercising effective control over the trust and the identities/names of all beneficiaries who are either actual or potential beneficiaries. It is possible to use a description of the class of persons to identify (actual or potential) beneficiaries. Where a beneficiary is un-named, being only part of a class of beneficiaries, a trustee will only need to disclose the identity of the beneficiary when they receive a financial or non-financial benefit from the trust.
The information required will include
- Date of birth
- NI number (NINO) if UK resident, unless under 16 years old, or a UTR, if any
- An address and passport or ID number for non-UK residents, if no NINO
Example of disclosure of beneficiaries
Trust deed states that the beneficiaries are the grandchildren of the settlor (some are alive and some are yet to be born) and any other persons added by the trustees as per instructions from the settlor.
The settlor adds his niece, Anna, so that she may benefit at the trustees’ discretion. The settlor also adds that, if Anna dies before any of the grandchildren, then a distribution can be made to his nephew, Brian.
For TRS purposes, the grandchildren should be listed as a class. However, if the trustees make a financial payment or provide a non-financial benefit to any of the grandchildren then at that point in time, the trustees should record the identity details of that particular grandchild that has been in receipt of a benefit.
Anna’s details should be registered as an individual, as she could receive a benefit at any point in time.
John should be identified as a class of beneficiary but if at some point in time in the future John is in receipt of a benefit from the trust assets, then this means he can be identified by name and as such his details should go on the TRS.
If there are any changes to the trust when does the TRS need to be updated?
Updates to the TRS are required by 31 January after the end of the tax year in which the change occurred if the trustees incurred a UK tax liability in the previous tax year. However, in practice HMRC will expect trustees to ensure that details of their trust are accurate and up to date at any point in time they make changes on the Register. Where no relevant changes have taken place since the end of the previous tax year, the update can be limited to confirmation that no such changes have occurred.
Please note that there have been teething problems with the functionality for lead trustees and agents to update their information or declare that there have not been any changes.
If the trustees have no UK tax liability (in respect of any given tax year) there is no requirement to update the Register. An update will then need provided by 31 January after the end of tax year in which the trustees do have a UK tax liability. However, changes can be made on a voluntary basis, even if the trustees had no UK tax liability.
Changes can be made to the trust’s correspondence address, the lead trustee can be changed, and it is possible to add or remove the details of the people who are associated with the trust at any time. For example, it is possible to add a new beneficiary or remove from the Register altogether a trustee or even an existing beneficiary if they are no longer deemed to be either an actual or potential beneficiary. It is also possible to close a trust or estate if it ceases to exist. These changes can be made at any time, and it is possible to update the information held on the Trust Register (in relation to any individual trust) on multiple occasions in the course of any given tax year.
The details of trust assets are only provided once at the first point of registration and if this changes over time there is no need to update information about the trust assets on the Register.
Although registration is not required for bare trusts, the legislation still requires that trustees hold accurate and up-to-date written records of all the actual and potential beneficial owners of the trust.
Interest in possession trusts where the income has been mandated to the income beneficiary
If the income is not received by the trustees, because it is paid directly to the beneficiary, then HMRC have no statutory basis to charge the trustees to income tax. Therefore the trustees have not incurred an income tax liability. No registration is required unless the trustees have incurred an income tax liability on other income, or they have incurred another tax liability, for example CGT.
Discretionary trusts and IHT
If a trust incurs IHT charges in 2019/20 but had no further UK tax charges until the 10th anniversary in 2029/30 then what is the position?
The trigger point for registration is when the trustees have incurred a UK tax liability. So, if the trustees incur a UK tax liability in 2019/20, then registration is required by 31 January 2021.
If no further relevant UK tax is paid until 2029/30, the next deadline is 31 January 2031 by which point the registered information must be updated or, where it remains up to date and accurate, a declaration that no changes have occurred. However, it is possible to voluntarily update the registered information before 31 January 2031.
Where the trust is registrable because there is an IHT liability, the registration deadline is determined by reference to the event and not the payment deadline (which is 6 months later). For example, consider an event which arises on 16 January 2020 with a payment deadline of 16 July 2020. In that case, the trust needs registered by 31 January 2021 i.e. 31 January after the end of 2019/20.
Maintaining accurate and up to date written records
Do trustees of all UK ‘express’ trusts regardless of incurring a tax liability in a given tax year need to maintain accurate and up to date written records? Yes. HMRC expect the trustees to maintain accurate and up to date written records of all the actual and potential beneficial owners of the trust as set out under regulation 44(1) of the legislation.
Written information to be maintained:
- Full name of the trust
- The date on which the trust was created
- The country where the trust is considered to be resident for tax purposes
- The place where the trust is administered
- A contact address for the trustees
- Full name of advisers who are being paid to provide legal, financial or tax advice to the trustees in relation to the trust
- Details of the settlors and beneficiaries
This information should be held because under the legislation any law enforcement authority can request information about the beneficial owners of the trust including from a trust which does not incur a liability to any of the relevant UK taxes.
TRS was introduced to fulfil the requirements of 4MLD, registering UK express trusts with a taxable consequence. 5MLD removes this link with taxation, widening the definition of those trusts required to register and changing the registration deadline requirement. The consultation proposes that all express trusts which are not mentioned as ‘out of scope’ will be required to register. Out of scope trusts include Statutory trusts (e.g. arising on intestacy). With regard to Bare trusts, these are being considered under the consultation. The government proposes that vulnerable beneficiary trusts and personal injury trusts be excluded as their inclusion would be disproportionate to the risk of them being used for money laundering or terrorist financing activity. Likewise, where the trust consists solely of a policy which is a pure protection policy and payment is not made until the death or terminal illness of the insured, it is proposed that these trusts will not be required to be registered on TRS.
Registered pension schemes held in trust are already subject to regulation by either the Financial Conduct Authority or the Pensions Regulator. There are also income tax controls on sums going into and out of the fund, and the benefits that can be provided by the funds. These controls reduce the risk of them being used for money laundering and terrorist financing and it is therefore proposed that they are not in scope for registration. Pension scheme trusts that are not registered with HMRC on ‘Pension Schemes Online’ or ‘Manage and Register Pension Schemes’ will be required to register on TRS.
The current TRS has a dual purpose: it is a central register containing beneficial ownership details for taxpaying express trusts to meet the requirements of 4MLD and it also serves to notify HMRC of a tax liability. The information collected enables HMRC to set up a tax record for the trust, provide a Unique Taxpayer Reference and issue a trust tax return where required. Where a trust is already registered on TRS under 4MLD some additional information will be required to fulfil the requirements of 5MLD. Trustees will be required to access the updated TRS system, once launched, to do so. Where a newly registered trust has no liability to tax, the trustees will only need to provide information about the beneficial owners of the trust - settlors, trustees and beneficiaries - in line with 5MLD requirements.
The government propose that
- Trusts in existence at 10 March 2020 (in line with the Directive) must register by 10 March 2022
- Trusts that are set up after 10 March 2020 must register within 30 days or by 10 March 2022, whichever is the later
- Trusts that are set up on or after 10 March 2022 will have 30 days to register
- Once registered on the updated system, trustees will have 30 days from when they are aware of any changes to update the details
Until 10 March 2022, all trusts that incur a tax liability for the first time should register on TRS under the current process in place for 4MLD and tax registration purposes. Communications will be issued to keep trustees informed of progress on updating the TRS system.
5MLD requires that, when entering into a new business relationship with a trust, ‘obliged entities’ must collect either proof of registration on the trust register, or an excerpt of the register. The government proposes that the onus will be on the trustee to provide this information rather than the obliged entity having direct access to the register. This means the trustee has control over who sees the information. An insurance company accepting a trustee investment application would seem to be an ‘obliged entity’.
4MLD requires access to the trust register for law enforcement agencies to aid their work in countering money laundering and terrorist financing. 5MLD broadens this access to third parties in certain instances.
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