Most existing and new trusts now need to be registered. The deadline for registration is 1 September 2022 or within 90 days of the creation of the trust, whichever is the later.
These trusts are created deliberately by an individual (the settlor) during his lifetime or on death (via the Will). Trustees have a general duty to keep and maintain an up-to-date written record of the beneficial owners involved in the trust (settlors, trustees and beneficiaries)as well as people with control over the trust, such as trust protectors and appointors. This information must be made available on demand from a law enforcement authority and to other authorised third parties.
Previously only trusts that were liable to UK tax to register. Now all express trusts that are not excluded trusts are required to register.
Trusts with a perceived low risk of money laundering are excluded from the requirements to be registered. The most important of these are:
- Charitable trusts - provided the charity is registered in the UK.
- Statutory trusts – for example a trust for minor children as a result of an intestacy.
- Pension scheme trusts.
- Trusts holding life assurance or healthcare policies.
- Certain pilot trusts.
- Co-ownership trusts (where property is owned as joint tenants or tenants in common).
- Trusts required for minor children.
- Disabled trusts.
- Will trusts that do not hold assets for more than two years.
It is important to realise that the above list is not exhaustive. Inevitably there are fine lines and traps for the unwary. For example, in the case of property owned by two or more people registration is mandatory if the legal owners are not the same as the beneficial owners. Situations like these call for another cup of coffee – or professional help.
There are many other trusts set up by the courts or created by legislation and professional advice will be needed to check whether registration is required or not. Some financial products have the word “trust” in their description but they are not really trusts and do not need registering.
Penalties for Non-Compliance
HMRC has updated its Trust Registration Service Manual to include details of penalties that maybe imposed on trustees. The lead trustee could face a fine of up to £5000, for which he would be personally liable, for failure to register a trust. In practice it can be expected that HMRC will reserve severe penalties for those trustees who ignore repeated warning letters or provide details on a given trust that are deliberately inaccurate. The TRS has teeth!
Trustees & Ongoing Duties
Trustees of registered trusts have a duty to ensure that details on the trust register remain accurate and up-to-date. Any changes to these details must be notified, through the TRS, within 90 days of the change. Such details include not only information about the beneficial owners - settlors, trustees, beneficiaries and others with control over the trust - but also changes to the trust itself, for example the trust incurring a UK tax liability or the purchase of UK land or property.
It is likely that trustees will turn increasingly to their professional advisers for help in this area, particularly as regulations are evolving and becoming more focused.
C&H Stedman will be glad to advise on the implications of the trust registration service.