Our Insights

HMRC’s Trusts and Registration Service (TRS) was born back in 2017 as part of the implementation of 4MLD[1]. 5MLD[2] has mandated notable amendments to the operation of the TRS that clients and practitioners should not overlook. We have created a Q&A to help to navigate the new upcoming compliance obligations.

Does my trust need to register under 4MLD?

Yes- if it is a relevant taxable trust.  This means a trust with a UK tax consequence i.e. the trust has a liability to pay UK income tax, CGT IHT or SDLT. There is no deminimus threshold. Registration deadlines are tied to when a tax liability is crystallised which itself depends on the type of tax liability payable.

Under 4MLD it is possible for non-UK resident trusts to fall in and out of TRS depending on when they have a UK tax liability e.g. a liability arises only on the occasion of a 10-year charge.

What about a trust with an IHT liability due to enveloped property?

4MLD did not extend to ATED. Assuming the property was held at company rather than trust level and the company was not a mere nominee then there would be no TRS obligation despite the Schedule 10 F(no2)A 2017 IHT look through.

So, what has changed in light of 5MLD?

5MLD has removed the tax consequence requirement and now all UK resident express trusts and some non-EU resident trusts must register irrespective of whether they have incurred a tax liability.

A non-EU trust must register with the TRS where the trust either acquires land in the UK after 10 March 2020 or after this date enters into a business relationship with a UK-based entity which is subject to AML rules. It is irrelevant where the trust itself is resident.

What does business relationship mean?

One off advice from a UK accountant or law firm is not covered but if it is advice given to the trust over some period then the trust will have to register – this aspect of the rules is controversial and not yet finally accepted particularly by those who are worried it will deter clients seeking UK tax advice. If you’ve already got an ongoing legal relationship with the UK firm prior to March 2020 then you don’t need to register just because of this existing business relationship. 

What about if the business relationship is with the underlying company?  

The business relationship should have an element of duration between the relevant person and the trust itself.

Is the register public? If so who has access?  

It is important to appreciate that under 5MLD, individuals who have a legitimate interest in information concerning the beneficial ownership of the trust can apply to access certain information.  This is potentially quite alarming for those who value their privacy. Someone asserting that they have a legitimate interest will have to provide information to substantiate that interest, such as why the applicant suspects that the trust has been used for money laundering. 

If you have already registered does this mean you are exempt from legitimate interest requests?

This remains unclear at the date of writing.

What about a Foundation?

The obligations imposed on trustees should be assumed to apply to the managers of a Foundation which for English law purposes would generally be characterised as a trust.

Can you register voluntarily?

The prospect of highly sensitive information regarding key individuals being delivered to HMRC and potentially being available to interested parties perhaps including investigative journalists albeit in strictly controlled circumstances will make few want to register unless obliged to do so.

What’s the timing on all of this?

The deadline for registering all pre-10 March 2020 trusts is 10 March 2022 and new trusts created after 10 March 2020 have 30 days to register. Any changes to the beneficial owners of the trust must be reported within 30 days. The 30 days deadline may prove to be quite a challenge for many trustees and will certainly be problematic for trusts created on death as it can take time for assets to vest.

What information needs to be registered?

When registering, the following information will be required:

1. name of the trust;
2. formation date of the trust;
3. place from which the trust is administered;
4. details of the trust’s assets including location and value;
5. identity of the settlor, trustees, protector and any other persons who have control over the trust; and
6. identity of the beneficiaries or classes of beneficiary.

For UK resident individuals name, date of birth and NI number is required. For non-UK resident individuals name, address and passport/ID number must be provided.

Trustees are required to make an annual declaration that the details on the register are correct. Information provided will be retained on the register for 6-10 years after the trust is terminated.

Is the above different from existing information already held/ required under 4MLD?

Where a trust is already registered for TRS under 4MLD, some additional information will need to be provided in order to fulfil the requirements of the new 5MLD (including whether or not a trust holds a controlling interest in a third party entity).

Are all trusts included?

5MLD covers express trusts. An express trust is one established deliberately by a settlor.  Therefore, excluded from scope are: statutory trusts, resulting trusts and constructive trusts. Unit trusts are also considered to be outside the scope of the definition of express trust.

UK registered pension schemes, UK charitable trusts are excluded as are 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. More detailed discussion of these exclusions should be considered if necessary.

Trusts established to meet legislative conditions such as PI trusts, trusts for the vulnerable, share option schemes, co-ownership trusts are also excluded.

What about nominee arrangements?

Bare trusts are expected to be excluded but HMRC clarification on this is still pending.

What happens if I don’t register?

Initial failure to register will be met with a nudge letter and there will be no financial penalty for a first offence of failure to update details but thereafter there will be a penalty of £100 per offence. Deliberate failure to register on time or update the register will carry significant penalties.

What if my trust is registered in another jurisdiction?

Some trusts will end up with registration obligations in multiple jurisdictions but if the trust is already registered in another EU member state then it does not need to also be registered in the UK under 5MLD.

[1] The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLR 2017) came into force on 26 June 2017 to implement the Fourth Money Laundering Directive ((EU) 2015/849)

[2] Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU