As part of the UK’s implementation of the Fifth Money Laundering Directive (5MLD), HM Revenue & Customs (HMRC) has extended the requirement for trust registration to non-taxable UK trusts and some non-UK trusts. You should now register all UK trusts and some non-UK trusts on HMRC’s Trust Registration Service (TRS), unless the trust is specifically excluded due to its characteristics. Failure to register, can result in a penalty.
You must register:
- non-taxable trusts in existence on or after 6 October 2020 by the 1 September 2022 (even if the trust has ceased before 1 September 2022, in which case it would need to be registered and immediately de-registered).
- 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.
NB this does not change the existing requirement to register any trust that incurs a tax liability.
Trusts that now require registration include:
- Interest in possession trusts (also known as life interest trusts)- where the beneficiary has the right to all trust income or the right to exclusive enjoyment of trust assets. This includes the right to live undisturbed in a property owned by the trust.
- Discretionary trusts, here the trustees have discretion to make decisions about how to use the capital and income of the trust.
- Some trusts for the benefit of minors and 18-25 trusts. These are trusts where the beneficiaries have no right to the trust capital until they reach a specified age. (In certain circumstances some of these types of trusts may fall within the very limited specified exclusions).
- Bare trusts, where assets are held in the name of a trustee. Under this type of trust the beneficiary has an immediate and absolute right to all of the capital and income of the trust. Contrary to what many people expect/assume, there is no specific exclusion from registration for bare trusts. A common arrangement caught be the TRS is where the legal title to a property is not registered in the name of all the persons entitled to a share of the proceeds on sale- e.g. where a declaration of trust protects a third party’s interest.
This is not an exhaustive list- other types of trusts may also fall within the requirement for registration. For more examples, see www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm10030
For more information on registrable and excluded trusts please see www.gov.uk/guidance/trust-registration-extension-an-overview
More detailed technical information can also be found in the Trust Registration Service Manual at www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual.
If you think the obligation to register a trust affects you, and you would like assistance in the registration of the trust, please contact our Private Client team.