Before the implementation of the Fifth Money Laundering Directive (5MLD), only trusts incurring a UK tax liability needed to register with HMRC’s Trust Registration Service (TRS). From 1 September 2022, this requirement has been expanded, and most UK express trusts now need to register unless specifically excluded. This article examines the rules relating to the registration of trusts with HMRC’s Trust Regulation Service.
Which trusts need to register with the TRS?
Any trust (whether a UK or non-UK trust) must register if it is liable for any of the following: Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, Land and Buildings Transaction Tax (in Scotland) or Land Transaction Tax (in Wales). This has been required since June 2017.
Following the implementation of 5MLD, from 1 September 2022, the following trusts must register even if they have no tax liability:
- all UK express trusts unless they are specifically excluded (see below)
- non-UK express trusts if they:
- acquire land or property in the UK on or after 6 October 2020
- have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK (such as with a bank, accountant, estate agent or solicitor) on or after 6 October 2020. A ‘business relationship’ is one with an element duration that goes beyond a brief or one-off transaction and lasts longer than 12 months.
What is an ‘express trust’?
According to HMRC, an express trust is one created deliberately by a settlor (usually in writing). This includes bare trusts, discretionary trusts and interest in possession trusts.
Trusts not set up deliberately by a settlor are not ‘express trusts’ and do not have to register unless they are liable to tax. Examples include:
- implied, resulting or constructive trusts
- trusts that arise on intestacy
- trusts created by court orders
Other excluded trusts include charitable trusts, co-ownership trusts where the trustees and beneficiaries are the same persons, trusts created to set up a bank account for minors or vulnerable persons, and trusts consisting solely of an insurance policy (such as a life insurance policy, which is a pure protection policy and payment is not made until the death or terminal illness of the insured).
What information must trustees register?
The trustees or agents will have to give some basic information about the persons involved in the trust (the settlors and beneficiaries). This will apply to both taxable and non-taxable trusts. This includes:
- the name of the trust
- the date the trust was created
- to say if the trust is an express trust or not
- details about whether a non-UK trust has a business relationship in the UK
- details about any UK land or property the trust has purchased
Failure to register a trust or notify a change of information by the due date can result in penalties being imposed on the trust. These can include a percentage of the trust’s total tax liability for a relevant year.
If you have any queries regarding the requirement to register trusts with HMRC, please contact Carolina Rudd at [email protected].