New trust registration rules: a guide

On 6 October 2020, the government introduced new rules to extend the scope of its trust register to all UK and some non-UK trusts – irrespective of whether they pay tax. Previously, a trust only had to be registered with the Trust Registration Service (TRS) if it paid any of the following taxes:

  • Income tax
  • Capital gains tax
  • Inheritance tax
  • Stamp Duty Land Tax (or Buildings Transaction Tax in Scotland)
  • Stamp Duty Reserve Tax

The new rules were introduced in line with the recent introduction of the Fifth Money Laundering Directive (5MLD), which greatly broadened the scope of trusts that must be registered with the TRS.

They will, the government states, ensure that the UK’s anti-money laundering and counterterrorist regime is “up to date, effective and proportionate”. The rules will also enhance transparency regarding the ownership of assets held in trusts, with this data to become more widely available.

Although they came into effect in Autumn last year, trustees will not be able to register trusts that fall within the scope of the new rules until later in 2021, when the new TRS service is ready.

Once it is up and running, trustees will have until 10 March 2022 to register. After this, trusts must be registered within 30 days of becoming registrable.

Which trusts have to be registered?
The following trusts must be registered with TRS, irrespective of their tax liabilities:

  • All UK ‘express’ trusts (i.e. a trust that has been deliberately created by a settlor), unless specifically excluded (see below)
  • Non-UK express trusts which have either:
    o At least one trustee who is a UK resident and where the trustees enter into a ‘business relationship’ with an ‘obliged entity’ e.g. a financial institution, lawyer or tax adviser – or the trust acquires UK land or property
    o The trust acquires UK land or property (irrespective of UK resident trustees)
  • Non-express trusts and specifically excluded trusts IF they have a tax liability (this is for Self-Assessment purposes)

Which trusts don’t have to be registered?
The following trusts do not have to be registered with the TRS, UNLESS they pay tax:

  • Pension scheme trusts
  • Trusts used to hold a protection policy, e.g. life insurance or income protection, if the policy only pays out when you die, become terminally ill or are permanently disabled
  • Trusts that hold insurance policy benefits, provided those benefits are paid out within two years of the insured person’s death
  • A life interest trust (i.e. a trust set up in a person’s Will which comes into effect when they die), as long as the assets are held for less than two years after the person dies
  • Trusts used by professional services firms to hold client money and assets
  • Charitable trusts
  • Co-ownership trusts to hold shares in a property for tenants in common
  • Trusts set up for children under the age of 18 in a parent’s Will, or adults aged 18-25 under the Criminal Injuries Compensation Scheme
  • Statutory trusts arising on an intestacy
  • Personal injury trusts
  • Trusts for a disabled beneficiary

The exclusion of life interest trusts is only for two years. If the trust’s assets have not be paid out or dispensed by the end of this period, the trust must be registered.

What do I need to do?
If you are a trustee with an unregistered trust that you believe should now be registered under the new rules (for example a lifetime trust that has held assets for over two years), then you should ensure you register it once the new TRS becomes available and no later than 10 March 2022.

If you are unsure about whether or not a trust should be registered, please get in touch with our Wills, Trusts & Probate team at mail@woodfines.co.uk or telephone 0344 967 2505, and one of our solicitors will be delighted to advise you.

-Jenny Teall

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