What is the UK Trust Registration Service?
Elaine Morgan examines the purpose of the UK TRS, and how it helps clients
UK express trusts – and some non-UK trusts – in existence on or after 6 October 2020 must be registered with the UK Trust Registration Service (TRS) by 1 September 2022. With the deadline approaching, Elaine Morgan, head of the Trusts and Tax team at Lodders, explains the registration process, and the obligations the new rules place on solicitors’ and trustees.
The Trust Registration Service
The Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. It was set up in 2017 as part of an EU anti-money laundering directive aimed at combatting money laundering, serious crime, and terrorist financing, and to satisfy the requirements of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.
All UK express trusts liable to pay UK tax were required to register. Each EU member state has a similar register, and the UK agreed to maintain the TRS as part of the Brexit Withdrawal Agreement.
New rules came into force in October 2020 requiring all UK trusts, apart from a few exceptions (see below), and some non-UK trusts in existence on or after 6 October 2020, to register with HMRC by 1 September 2022, including trusts that have closed since that date.
Previously, only trusts that paid certain taxes were required to register with the TRS. The new rules have widened the TRS to all UK trusts, including ones not liable to tax, unless the trust is specifically excluded.
The data on TRS is only available to those with a ‘legitimate interest,’ such as law enforcement agencies investigating money laundering and the financing of terrorist activities. HMRC can refuse access where there is a disproportionate risk of exposing the beneficial owner for example to fraud, blackmail, or intimidation.
Key dates and deadlines
The deadline and timescales for the registration of existing or new trusts are:
- Non-taxable trusts in existence on or after 6 October 2020 must be registered by 1 September 2022 (even if they are now closed).
- Non-taxable trusts created after September 2022 must be registered within 90 days.
- Changes to the trust details or circumstances must be registered within 90 days of the change.
- Personal representatives (the person(s) responsible for managing the deceased’s estate) need to register with HMRC by 5 October after the tax year when the estate starts to receive income or has chargeable gains on which tax is payable, if the estate is classed as complex.
- Personal representatives need to register with HMRC where the estate has been administered for over two years at the two year anniversary from the date of death.
- The registration deadline for taxable relevant trusts set up before 6 April 2021 is on or before 31 January after the tax year in which the tax liability occurred (or by 5 October after the end of the tax year for a first-time liability to Income Tax or Capital Gains Tax).
- For trusts set up after 5 April 2021 the deadline has been extended to 1 September 2022. Taxable relevant trusts set up on or after 4 June 2022 must be registered within 90 days of the trustees becoming liable to pay UK taxes. This also applies to non-taxable trusts.?Once a trust is registered on the TRS the trustees will have 90 days from becoming aware of any changes to update the register.
Which trusts are excluded from the TRS?
The full list of trusts not required to register can be found on GOV.UK, but Trusts excluded from the requirement to register include:
- pension schemes
- charitable trusts
- will trusts that are wound up within two years of death
- policy trusts paying out on death or critical illness
- existing trusts with a value of less than £100 created prior to 6 October 2020.
How to register a trust with the TRS
It is important for clients to understand the benefits of appointing an experienced trust administrator who is specifically trained to gather the information required to complete the TRS process and register the trust.
Responsibilities of which you should make trustees aware
Solicitors should advise clients the legal responsibility for registration of trusts falls on the trustees, and with advice, if necessary or requested, that trustees decide on and appoint a lead trustee to do this. Alternatively, trustees can appoint an agent, such as a solicitor, to register the trust.
The trustees are required to keep accurate and up-to-date written records of the beneficial owners, including settlors (i.e. the persons who established the trust), trustees, and beneficiaries.
The lead trustee is also obliged to keep the register updated each year or when certain specific events occur. HMRC may impose penalties and fines for non-compliance on trustees who fail to comply with the registration requirements.
In addition, trustees must register ‘complex estates’ on the TRS, which are defined as an estate where:
- the total tax liability (income tax plus capital gains) for the entire administration period exceeds £10,000;
- the probate gross value exceeds £2.5 million;
- the value of the assets sold by the personal representative in any one tax year exceeds £500,000.
Information required to register the trust
In order to complete the online registration process, trustees must enter details about:
- the lead-trustee
- the co-trustees
- the settlor
- the beneficiaries
A complete list of what information is needed is available?on GOV.UK.
What happens if a trust is not registered with the TRS?
Solicitors should explain to clients that there is a legal obligation for trustees to register a trust, and that that some trusts* are exempted from this rule, because if a trust is not registered with TRS and then its details are not kept up to date on the register, then HMRC will enforce financial penalties.
Currently, the proposal is for these penalties to be less severe than the self-assessment penalty regime, and ‘nudge letters’ are sent for first offences with a proposed penalty of £100 for any subsequent offences.
If HMRC does issue financial penalties, there will be a similar appeals process to the self-assessment regime. HMRC will enforce more stringent penalties if trustees deliberately ignore the registration requirements.
Covering fees or penalties
It is the trustees’ responsibility to register the trust and keep it up to date. The trustees can appoint a solicitor or an agent to do this on their behalf – but if the trust does not hold cash to pay for this, the trustee or beneficiary can lend money to the trust to cover the cost of professional advice and fees.
Do all beneficiaries have to be listed?
HMRC wants an accurate picture of who can benefit from a trust. Where a beneficiary is named on a trust instrument – separate from members of a named class – they can clearly be determined, and trustees (and/or their agent) must provide the relevant information.
Where a beneficiary is unnamed – being only part of a class of persons – a trustee will only need to disclose the identities of the beneficiary when they receive a financial or non-financial benefit from the trust.
Consideration should be given in future drafting to reduce the number of named beneficiaries in deeds where possible.
What trust changes must be recorded on TRS?
The register must be updated if the trust becomes liable to income tax trust or capital gains tax, or if there are any changes to trustees’, beneficiaries’ or settlors’ details. Changes must be recorded on TRS within 90 days to avoid fines and penalties.
Do offshore trusts have to be registered with TRS?
Offshore trusts must be registered if they have at least one UK resident trustee. This also applies to non-UK registered trusts acquiring land or property in the UK. Trusts already registered in another EU Member State are automatically exempt from UK registration.
Do all estates need to register on the TRS?
Estates where the administration has continued for more than two years – and complex estates – need to register on the TRS. For the purposes of TRS, a complex estate is defined as an estate that does not meet the conditions for using the informal payment procedures.
In estates where there are underlying trusts, the dates for registration vary, so solicitors should be in a position to assist with providing these dates as part of the professional legal advice provided to trustees.
Who can ask to see details on the TRS?
Details of the register will only be released in certain circumstances to those with a ‘legitimate interest,’ such as law enforcement agencies where there is evidence of money laundering or terrorist financing activity.
Clients can be assured that beneficiary information will not be disclosed if there is a risk of fraud, kidnapping, blackmail, extortion, harassment, violence, or intimidation, or where a beneficiary is a minor or otherwise legally incapable.
Who needs to know a trust is registered with TRS?
Third parties are required to have formal confirmation that the trust is registered and up to date on TRS before they can act for a trustee. For example, if your client is wishing to sell a trust property the estate agent a conveyancer will need to see evidence in the form of a certificate downloaded from the register.
What do the TRS rules mean for professional advisers?
Advisers need to be aware there could be a compliance risk if, as the trustees’ solicitor, they store documents for clients which are trusts that need to be registered with TRS. Solicitors and firms should take steps to check records and write to clients to advise them of the new requirements well ahead of the deadline(s), and explain the steps needed to be taken and completed ahead of the relevant key dates.
If there are partners in the firm appointed as trustees on clients’ trusts, then a note of these must be held by the firm in order that these can be looked at and registered.
Find out more
Trust Registration Service Manual (GOV.UK)
Register a trust as a trustee (GOV.UK)