UK trust register expanded

Does your trust now have to register with HMRC?

The Trust Register (the Register) first came into force in 2017. At that time, the purpose of the Register was to:

• provide a way for trusts which are liable to UK income tax or capital gains tax to register with HM Revenue & Customs (HMRC);
• it fulfilled the UK’s obligation under the EU’s Fourth Money Laundering Directive to maintain a central register of the beneficial ownership of tax paying trusts;
• all trusts which have UK tax liabilities (income tax, capital gains tax, inheritance tax or stamp duty) are liable to register whether or not the trustees are UK resident; and
• the Register is not public and the information was only available to government authorities.

The changes

The UK has now implemented the EU’s Fifth Money Laundering Directive (5MLD). This has required significant changes to the Register (and to the trust registers of all EU Member States). The main changes are as detailed below.

All UK express trusts will have to register whether or not they have tax liabilities although there is a list of exempted trust types. These being:

• trusts used to hold money or assets of a UK registered pension scheme;
• trusts used to hold a life insurance policy, income protection policy, or retirement benefits, provided these policies meet certain requirements;
• trusts holding insurance policy benefits provided that the benefits are paid out within two years of the death of the person assured;
• charitable trusts which are registered as a charity in the UK or which are not required to register as a charity (for example, schools, museums, galleries and churches);
• ‘pilot’ trusts which were set up before 6 October 2020 for a future use and which hold no more than £100;
• co-ownership trusts set up to hold shares of property or other assets which are jointly owned by two or more people for themselves as ‘tenants in common’;
• will trusts which are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to two years after the person’s death;
• trusts for bereaved children under 18 or adults aged 18-25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme; and
• ‘financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets.

However, if any of the above trusts have a UK liability to tax they will be required to register.

Those trusts which are already registered will have to provide some additional information about their beneficial owners. Their name, nationality, country of residence and the extent of their interest.

Non-EU trusts that acquire UK real estate after 5 October 2020 or have at least one UK resident trustee and enter into a business relationship with a UK service provider will also be required to register.

Third parties will be able to access information on the Register, provided they can demonstrate a legitimate interest.

Trustees will be required to supply the trust’s registered beneficial ownership information to any service provider with which they enter into a business relationship. Service providers will have to report any discrepancy between the information on the Register and the information obtained as part of the due diligence obligations.

Deadlines and penalties

Trustees will only have ninety days (up from thirty) from the creation of a trust or from the date of any changes to the beneficial owners of the trust or liability to UK tax to report the relevant information.

The Register for non-taxable trusts became available on 1 September 2021. Trustees will have until 1 September 2022 to register their trust and fulfil their obligations. Failure to register may result in penalties being applied by HMRC.