By Tanya Wadeson, Trust Compliance Manager - Senior Associate at Irwin Mitchell

HMRC have finally made the Trust Register live to comply with the 5MLD. Even though the Trust Register is overseen by HMRC, this isn't a tax requirement but ensures the trusts in the UK are compliant for anti money-laundering purposes. 

Trustees have until September 2022 to register all non-taxable trusts. The regulations came into effect almost a year ago, on 6 October 2020, but there was a delay while the systems for the existing Trust Register Service (TRS) were adapted and a new HMRC manual was developed.

Previously only trusts which had a UK tax liability were required to register but now all UK express trusts, including bare trusts, will now be required to register through the TRS, unless the trust is specifically excluded.  

Non-UK trusts are also caught by the new rules. A non-UK express trust which is liable to UK taxation as a result of receiving UK source income or holding assets in the UK will be registerable. Where the non-UK express trust owns shares in a UK or non-UK company and the company owns UK assets which trigger a UK tax liability, this will not trigger reporting unless the ownership of the asset (or receipt of income from the asset) is treated as a ‘look through’ for any relevant UK tax purposes (such that any UK tax liability is the tax liability of the trustees and not the company).

Unless included within those exclusions listed below, non-UK express trusts will also be caught where at least one trustee is UK resident and the trustees enter into a new business relationship with a UK ‘relevant person’ (such as a law firm or accountant) after 6 October 2020.

Non-UK express trusts which do not fall within a specified exclusion will also be caught where the trustees acquire land or property in the UK.

The categories for the excluded trusts (broadly, those express trusts HMRC considers to be of lower risk of money laundering or terrorist financing due to other regulatory requirements) are:

  • Trusts imposed by legislation or court order, for example trusts arising on intestacy or by court order on divorce
  • A pilot trust created before 6 October 2020 which holds property with a value not exceeding £100 (all pilot trusts created on or after 6 October 2020 will be required to register)
  • Will trusts, provided they don't remain in existence for more than two years following the testator’s death
  • Trusts of jointly held property where the trustees and beneficiaries are the same persons
  • Personal injury trusts, disabled persons trusts and certain other trusts that meet statutory conditions for beneficial tax treatment.
  • Charitable trusts either registered in England & Wales, Scotland or Northern Ireland or not required to register, for example because of their level of income

Naturally, a registerable express trust may develop into a registerable taxable trust, at any time, if IHT, CGT, Income tax, SDLT or SDRT become payable. If it does, it changes to the different detailed rules for registerable taxable trusts - even if it was only a one-off tax payment.

The legislation came into effect on 6 October last year and applies to all trusts in existence at that time, not only trusts created since then.  Therefore you may have trusts which have been created years ago with no income producing assets which have remained dormant, these trusts will now be caught as registerable express trusts. 

One anomaly to note is the co-ownership of properties where the legal and beneficial owners are different; these are bought into the scope of registration under the 5th Money Laundering Directive.

Going forward, new trusts will now need to be registered within 90 days of creation if later than 1 September 2022 or within two years of death if created by a Will. This deadline of two years ties in nicely with the key date for completing a deed of variation.

The clock has started ticking for trustees to review all of their trusteeships and ensure they're compliant with the new regulations.

The TRS is another layer of compliance for trustees to consider alongside their other responsibilities. We have specialist teams who support trustees with trust administration, compliance and disputes, to assist trustees in meeting their obligations. As well as offering a fully bespoke trust administration service, we also offer trust registration, tax return and trust accounts preparation as standalone fixed fee services. We can review your trust to help you understand your responsibilities and help you ensure that you meet all necessary deadlines and compliance obligations. Please contact us for more information.  Fees start from £350 + VAT.

Click here for our helpful guide to Trustees.