Trust Registration Service (TRS)
Learn about the requirements of the TRS which became operational on 13 July 2017.
- The TRS originally reflected government obligations under 4MLD. We now have 5MLD to consider
- 5MLD is effective from 6 October 2020 with regard to TRS aspects
- 5MLD extends the scope of the TRS and widens the definition of trusts required to register
- Registration deadlines apply
Money Laundering Directives
The UK government obligations under the Fourth Money Laundering Directive (4MLD) came into effect in June 2017 (see here). Amendments to Regulations implementing 5MLD came into force on 10 January 2020. However, so as to allow for further consultation, this did not include changes required to the TRS. A government consultation was launched on 24 January 2020, running to 21 February 2020 to consider the knock on changes necessary to the TRS. On 15 July 2020, the government published the main responses received and the next steps. TRS regulations under 5MLD came into force on 6 October 2020
This article initially reflects 4MLD obligations before considering the impact of 5MLD. Draft HMRC Guidance dated 22 November 2017 is also considered. There appears to be no published final guidance. This internal HMRC manual was published in May 2021 and covers off the TRS.
In the past, HMRC required completion of paper Form 41G (Trust) to register a new trust. This captured important information such as the names and addresses of the trustees, details of any professional agent acting, the governing law, lifetime trust or will trust, and so on. HMRC did state however “if there is no income arising, and no likelihood of income or gains in the future, you do not need to complete this form”. This was a useful exclusion in situations where the trust fund simply comprised a non- income producing investment bond.
HMRC embraced the digital world when it recognised the UK government obligations under 4MLD. Form 41G (Trust) was therefore withdrawn and instead trusts that are required to register, do so through the TRS.
Note that trusts in place before the introduction of the TRS are also required to be registered because the new legislation expands the scope of information previously collected.
The TRS provides a single online route for trusts (and complex estates) to comply with their registration obligations and to obtain their Self-Assessment (SA) Unique Taxpayer Reference (UTR). Trusts require a UTR in order to submit the SA tax return.
A complex estate is one that does not meet the conditions for using informal payment procedures.
For the avoidance of doubt, these TRS obligations are unconnected to the obligations to complete IHT100 when lifetime transfers are made.
Under 4MLD, ‘Express’ trusts with UK liabilities were required to register whether UK or non UK resident.
The term “express trust” means a trust that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose, as opposed to a statutory, resulting or constructive trust.
The legal responsibility for registration lies with the trustees.
Where there are multiple trustees, it is a matter for the trustees to decide and appoint a lead trustee to complete the registration process. All trustees are equally legally responsible for the trust, and therefore the nominated ‘lead’ trustee is simply the main point of contact for HMRC. If, for example, there are four trustees, this would be recorded as one lead trustee and three additional trustees. The trustees can appoint an agent to complete the registration process if they so wish (see later section).
With regard to professional advisers, the TRS requires the details of the agent (if one exists) registering on behalf of the trustees. No further information on other advisers is required. In saying that, trustees should keep their own written records of any advisers being paid to provide legal, financial or tax advice in relation to the trust.
When a trust is registered for the first time, that is a new registration process. In later years the trustees will either just update the details of the existing registration or confirm that the details remain up to date and accurate.
The guidance is very detailed and therefore the following simply reflects some of the ‘highlights’ that may be particularly relevant for advisers.
UK trusts that needed to use the TRS under 4MLD
An ‘express trust’ where the trustees have incurred a liability, in a given tax year, to pay any of these UK taxes
- Income Tax
- Capital Gains Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax and (in Scotland) Land and Buildings Transaction Tax
UK trusts that did not need to use the TRS under 4MLD
Trusts which did not need to register included those falling under these circumstances
- the trustees do not need to file a tax return and have not incurred a UK tax liability
- the settlor or a beneficiary of the trust has incurred the UK tax liability but the trustees are not liable
- the trustees of a bare trust as no UK tax liability arises at trust level
- where all income is received directly by the UK resident beneficiary and not reported on the trustees’ tax return (unless they have another UK tax liability such as capital gains tax)
- the trustees of a charitable trust will not have to register until they incur a UK tax liability
- a statutory trust
- the trust has no other UK tax liability other than a tax liability of less than £100 on bank or building society interest income
With regard to the first bullet, a discretionary trust holding a non- income producing investment bond springs to mind (assuming also no IHT liabilities). Remember however that UK resident trustees may become taxable if a chargeable event gain subsequently arises and the settlor cannot be taxed because he/she died in an earlier tax year or is non UK resident. For example if the bond is held in a discretionary will trust then the trustees will need to register if a chargeable event gain occurs. If a UK resident settlor is taxable albeit that he/she may recover the tax from the trustees, then that situation seems to fall under the second bullet point.
Deadlines for registration of taxable trusts
This depends on whether the trust is already registered for Self-Assessment (SA) for Income Tax or Capital Gains Tax.
Trust already registered for SA
- Where the trustees incur a UK tax liability in a given tax year, then the registration deadline is 31 January after the end of that tax year.
Trust not registered for SA
- Where the trustees incur an Income Tax or a Capital Gains Tax liability for the first time in a given tax year, then the registration deadline is 5 October after the end of that tax year in order to give enough time to issue the UTR.
Trust not registered for SA
- Where the trustees incur either an Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, or a Land and Buildings Transaction Tax (Scotland) liability in that tax year, then the registration deadline is 31 January after the end of that tax year.
Information required by the TRS
Details of the trust assets, including addresses of UK properties, and a market valuation of assets held at the date that the assets were settled. The TRS only collects information on the values at the initial registration.
In addition, the identity of the settlor, trustees, any person exercising effective control over the trust and the identities/names of all beneficiaries who are either actual or potential beneficiaries. It is possible to use a description of the class of persons to identify (actual or potential) beneficiaries. Where a beneficiary is un-named, being only part of a class of beneficiaries, a trustee will only need to disclose the identity of the beneficiary when they receive a financial or non-financial benefit from the trust.
The information required will include
- Date of birth
- NI number (NINO) if UK resident, unless under 16 years old, or a UTR, if any
- An address and passport or ID number for non-UK residents, if no NINO
Example of disclosure of beneficiaries
Trust deed states that the beneficiaries are the grandchildren of the settlor (some are alive and some are yet to be born) and any other persons added by the trustees as per instructions from the settlor.
The settlor adds his niece, Anna, so that she may benefit at the trustees’ discretion. The settlor also adds that, if Anna dies before any of the grandchildren, then a distribution can be made to his nephew, Brian.
For TRS purposes, the grandchildren should be listed as a class. However, if the trustees make a financial payment or provide a non-financial benefit to any of the grandchildren then at that point in time, the trustees should record the identity details of that particular grandchild that has been in receipt of a benefit.
Anna’s details should be registered as an individual, as she could receive a benefit at any point in time.
Brian should be identified as a class of beneficiary but if at some point in time in the future Brian is in receipt of a benefit from the trust assets, then this means he can be identified by name and as such his details should go on the TRS.
If there are any changes to a taxable trust when does the TRS need to be updated?
Updates to the TRS are required by 31 January after the end of the tax year in which the change occurred if the trustees incurred a UK tax liability in the previous tax year. However, in practice HMRC will expect trustees to ensure that details of their trust are accurate and up to date at any point in time they make changes on the Register. Where no relevant changes have taken place since the end of the previous tax year, the update can be limited to confirmation that no such changes have occurred.
If the trustees have no UK tax liability (in respect of any given tax year) there is no requirement to update the Register. An update will then need provided by 31 January after the end of tax year in which the trustees do have a UK tax liability. However, changes can be made on a voluntary basis, even if the trustees had no UK tax liability.
Changes can be made to the trust’s correspondence address, the lead trustee can be changed, and it is possible to add or remove the details of the people who are associated with the trust at any time. For example, it is possible to add a new beneficiary or remove from the Register altogether a trustee or even an existing beneficiary if they are no longer deemed to be either an actual or potential beneficiary. It is also possible to close a trust or estate if it ceases to exist. These changes can be made at any time, and it is possible to update the information held on the Trust Register (in relation to any individual trust) on multiple occasions in the course of any given tax year.
The details of trust assets are only provided once at the first point of registration and if this changes over time there is no need to update information about the trust assets on the Register.
Maintaining accurate and up to date written records
HMRC expect the trustees to maintain accurate and up to date written records of all the actual and potential beneficial owners of the trust as set out under regulation 44(1) of the legislation.
Written information to be maintained:
- Full name of the trust
- The date on which the trust was created
- The country where the trust is considered to be resident for tax purposes
- The place where the trust is administered
- A contact address for the trustees
- Full name of advisers who are being paid to provide legal, financial or tax advice to the trustees in relation to the trust
- Details of the settlors and beneficiaries
This information should be held because under the legislation any law enforcement authority can request information about the beneficial owners of the trust including from a trust which does not incur a liability to any of the relevant UK taxes.
TRS was introduced to fulfil the requirements of 4MLD, registering UK express trusts with a taxable consequence. 5MLD removes this link with taxation, widening the definition of those trusts required to register and changing the registration deadline requirement. 5MLD was effective from January 2020 for due diligence aspects but just 6 October 2020 for the expansion to the TRS.
These new rules extend the scope of the TRS to all UK and some non-UK trusts, regardless of whether the trust has to pay any tax, but with some specific exclusions. In other words, that link with taxation has now gone.
TRS functionality was such that trustees of non-tax-paying trusts were initially unable to register trusts under the new rules. However in this Newsletter dated 2 September 2021, HMRC confirmed that the TRS was open for non taxable trust registrations.
- Non taxable trusts in existence on or after 6 October 2020 must be registered by 1 September 2022.
- Non taxable trusts created after September 2022 must be registered within 90 days (originally just 30 days)
- Changes to the trust details or circumstances must be registered within 90 days of the change (originally just 30 days).
Don’t forget there will be trusts which are required to register because they have UK tax liabilities. Those trustees should comply with the existing timescales. So, for example, if the trust becomes liable to income tax or CGT in 2020/21 for the first time then it must register by 5 October 2021.
What trusts need registered based on the combined 4th and 5th Directives?
Trusts now needing registered fall into 3 broad categories.
- All UK express trusts, unless they’re specifically excluded under 5MLD.
- Certain non UK express trusts. This catches non UK trusts with at least one UK resident trustee which enters into a ‘business relationship’ with an ‘obliged entity’ or acquires land or property in the UK. An obliged entity could be a financial institution, an adviser, an accountant etc. In any event, this will be rare as why have a non UK trust with a UK resident trustee? The second type of non UK trust caught is where the trustees are all non-UK but the trust acquires land or property in the UK.
- Non-express trusts and specifically excluded express trusts which have a tax liability – it makes sense that these trusts need to be registered on the TRS for Self-Assessment purposes. So basically what the government is saying is that non express trusts and excluded express trusts carry a low money laundering risk but if they have a tax liability then still need to register to get them on the Self-Assessment system. Remember that the TRS is the online route for trusts to obtain their Self-Assessment Unique Taxpayer Reference which is required to submit the Self-Assessment tax return.
Just to be clear, that the link with taxation under 4MLD has now gone under 5MLD because the scope of the trust register has been extended to trusts whether or not the trustees have any tax to pay.
That means Bare trusts now need to be registered – the carve out that existed for them under 4MLD has been removed under 5MLD.
There is also no carve out for trusts (bare and non-bare) holding a non-income producing investment bond. We therefore know what trusts, in principle are included but what about trusts specifically excluded under 5MLD? The reason for the exclusions below is that these excluded trusts are often set up for a very limited purpose and are very unlikely to be used for money laundering or terrorist financing because they are highly regulated or are registered elsewhere. Remember though that they do need to be registered if they are liable to pay tax.
This isn’t an exhaustive list, but certain trusts don’t need to register under 5MLD.
1) Trusts holding insurance policies while the life assured is still alive - the policy must only (though see below) pay out on death, terminal or critical illness or permanent disablement of the life assured, or to meet the cost of healthcare services provided to that person. It’s not relevant whether the policy is whole of life or term, providing the conditions are met. Recently as at August 2021, HMRC reportedly confirmed the exclusion applies to policies which have or can acquire surrender values, but this doesn’t extend to policies such as Insurance Bonds which principally have an investment motive. Further clarification will be issued in due course. In September 2021, HMRC confirmed that “We would also like to confirm that in line with the policy intention, amendments will be made to the legislation to clarify that all healthcare policies held in trust, including those that are not part of a wider life policy, are excluded from registration.”
2) Trusts holding proceeds from insurance policies received on death of the life assured - a trust holding a policy excluded from registration while the life assured is alive remains excluded if, the trust receives a pay-out following death of the life assured. The exclusion applies for two years after death. This gives the trustees time to distribute the funds to beneficiaries.
3) Pilot trusts – trusts holding not more than £100 and already in existence before 6 October 2020 are excluded. Trusts created after 5 October 2020, or that have funds added after that time and so breaching the £100 limit, are required to register.
4) Will Trusts - excluded from registration for two years from date of death. If it is still in existence after that date or if at any point property is added from outside the estate, it will need to register from that date.
5) Trusts set up under intestacy rules and Personal Injury Trusts set up under a court order to receive compensation. Basically trusts which don't result from the clear intentions of the settlor.
6) Trusts for bereaved children under 18, and 18-25 trusts where a parent has died
7) Co-ownership trusts set up to hold shares of property or other assets which are jointly owned by 2 or more people for themselves as ‘tenants in common’
8) Charitable Trusts
In September 2021, HMRC confirmed that with respect to child bank accounts,
“Amendments will be made to the legislation to ensure that trusts required in order to open a bank account for a child are excluded from registration."
Changes to the TRS as a result of 5MLD can be summarised as follows:
Those trusts already registered need to provide additional information regarding beneficial owners. If the trust has a UK tax liability the information required is more extensive.
- All UK trusts with and without a tax liability need to register (subject to the above ‘low risk’ type exemptions).
- Any non-UK trusts that acquires UK land or property will be required to register.
- Non-UK trusts entering a UK business relationship if the trust has at least one UK resident trustee need to register
5MLD requires that, when entering into a new business relationship with a trust, ‘obliged entities’ must collect either proof of registration on the trust register, or an excerpt of the register - HMRC guidance states that trustees can download a pdf from the TRS to support these due diligence checks. Indeed, the government proposes that the onus will be on the trustee to provide this information rather than the obliged entity having direct access to the register. This means the trustee has control over who sees the information. An adviser or an insurance company dealing with a trustee investment situation would seem to be an ‘obliged entity’. The proof of registration requirement before establishing a business relationship with a trust comes into force on 10 March 2022 but it is likely that date will change to 1 September 2022 to coincide with the deadline for registering non-taxable trusts in existence on or after 6 October 2020 (see above). Regarding the timing of the due diligence check, the regulations state it’s possible to complete verification while (rather than before) a business relationship is being established if that’s necessary to prevent interruptions in normal conduct of business and there’s little risk of money laundering/terrorist financing. Investment Bond business wouldn’t however fit into that description. Also, for trusts that contain classes of beneficiary, there have to be sufficient safeguards in place to make sure verification of the beneficiary is completed before any payment is made to the beneficiary, or the beneficiary exercises vested rights in the trust.
Finally, for the avoidance of doubt, where a trust is already registered for TRS under 4MLD, some additional information will need to be provided to fulfil the requirements of 5MLD. This article prepared by the Association of Taxation Technicians details that requirement.
Appointing an Agent
How to register a trust depends on whether you’re a trustee or an agent registering a trust for a client. On Gov.UK this link providers guidance if you want to register a trust as an agent. When registering the trust, the agent will need to
- Have registered as an agent
- Create an agent services account
- Use an agent services account Government Gateway user ID and passport
Although the agent may have completed the initial registration for a trust, this does not provide authorisation to complete subsequent updates to the register. A further authorisation process is required which needs the trustees to ‘claim a trust’ and set up a Government Gateway account for the trust.
Whether the trustees appoint an agent or undertake these duties personally is a personal decision to be taken on a case by case basis. Advisers considering acting as agents will need to balance the desire to assist trustees, possibly with limited experience of such matters, against the workload of registering and updating the TRS, and not forgetting the practicalities as to any impact on PI Insurance. Another possibility is that advisers might point trustees in the direction of those who can provide an outsourced agency service.
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