The regulations have changed for trustees. Are you prepared?
- Russell Miles
- 21 June 2022
- 10 mins reading time
The EU’s Fifth Money Laundering Directive requires all UK trusts (with some exceptions) and certain non-UK trusts to register with HMRC’s Trust Registration Service.
This will affect you if you have a Discounted Gift Trust, Loan Trusts or a Gift Trust including those established using a deed of variation to a Will.
Trustees have until 1 September 2022 to comply.
If you are unclear about whether your trust needs to be registered or not, we recommend you speak to your trust provider this may well be the life assurance company that your investment bond (or other product) is held with. Their contact details should be available on your latest communication from them or can be found on their website. If Schroders Personal Wealth advised on a trust established after June 2019, then we will be able to help you with this.
Trustees of UK-resident and some non-UK resident trusts have been required to register taxable trusts with HMRC’s Trust Registration Service (TRS) since 2017. In practice this means any trust at the point it has to pay any of the following forms of UK tax:
Capital gains tax
Stamp duty reserve tax (when stocks and shares are traded)
Stamp duty land tax (England and Northern Ireland)
Land and buildings transaction tax (Scotland)
Land transaction tax (Wales)
So what’s changed?
In 2020 the UK Government enacted the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 act. This brought the latest EU rules on trust registration into UK Law.
Since September 2021 the new regulations have required many more trusts to become registered. Trustees with business relationships in the Republic of Ireland have to be listed on the Irish register as well as the UK register. This includes any trusts holding investment bonds issued in Ireland.
The regulations have also increased the amount of information trustees have to report. And third parties will now be able to access this information under certain circumstances.
What types of trust does it affect?
Non-taxable trusts in existence on or after 6 October 2020 must register within 90 days of being created or otherwise becoming registerable, or by 1 September 2022 (whichever is later).
Non-UK trusts will also be required to register within 90 days if they have at least one trustee who is resident in the UK and enter into a business relationship with a UK adviser, or if they acquire UK real estate.
From the start of September 2022, any new trusts will have to be registered within 90 days of being set up and any changes will also have to be updated within 90 days of when they take effect.
All UK “express” trusts (see below) will now have to register with some exceptions that we’ll cover in the next section.
Importantly, Discounted Gift Trusts, Loan Trusts and Gift Trusts, including those established using a deed of variation to a Will, are all example of express trusts that must now register.
What is an express trust?
An express trust is any trust that has been created by someone intentionally. That is, it has been created with an express purpose. It can include a life insurance policy held in trust; a discretionary trust drawn up by your legal advisers; or a trust that comes into effect when you die. Some of the benefits provided by an occupational pension scheme would also be an example of an express trust
What types of trust are excluded from the new rules?
There is a large list of exemptions but the main ones are:
Trusts imposed by legislation or court order; for example because of intestacy or divorce, or to protect a vulnerable individual or a minor.
Charitable trusts registered in England and Wales, Scotland or Northern Ireland, or those that don’t have to register (for example because of their level of income).
Will trusts provided they only remain in existence for two years or less following the testator’s death.
Trusts of jointly held property where the trustees and beneficiaries are the same persons
Personal injury trusts, disabled persons trusts, and some trusts that meet statutory conditions for beneficial tax treatment.
Protection policies held in trust and which pay out on the death, terminal illness, critical illness or permanent disablement of the person assured, or which pay for the healthcare services of the person assured.
Trusts registered on another register within the European Economic Area (EEA).
Registered pension schemes as these are already regulated by the FCA or the Pensions Regulator.
A pilot trust created before 6 October 2020 with assets of £100 or less. Pension death benefits are typically pilot trusts and will remain excluded until the death benefits are added to the trust before distributing to the beneficiaries. All pilot trusts created on or after 6 October 2020 will need to register.
Cash deposit accounts opened at a bank or building society on behalf of a minor or someone who lacks mental capacity. This is a type of “bare” trust.
If you are uncertain about whether your trust falls within an excluded category, please speak to your trust provider.
It is important to remember that an excluded trust will still need to register in the future if it acquires a UK tax liability.
What information must trustees provide?
You will need to register the name of the trust, for example the Joe Bloggs Settlement, and the date the trust was created. You will also need to provide the following information for each settlor (person who establishes the trust), trustee (those responsible for administering the trust’s assets), protector (someone who oversees the work of the trustees), and beneficiary (the person who receives any income or assets from the trust):
the individual’s name
the individual’s month and year of birth
the country of residence of beneficial owner
the nationality of beneficial owner
the nature and extent of beneficial interest held
the nature being their role, i.e. settlor, trustee or beneficiary
the extent gives the context of that interest, i.e. one of three trustees etc.
the mental capacity of any of the named individuals; HMRC cannot disclose information to third parties about those who lack mental capacity
You might also need to supply information about the trust’s assets or any non-EEA companies controlled by the trust.
You’ll need to make sure you have all the information to hand before you can start registering the trust so gather together as much information as possible. You will also need a Government Gateway user ID and password.
How do I register a UK trust and update its details?
If you are registering a trust as a trustee go to: https://www.gov.uk/guidance/ register-a-trust-as-a-trustee
If you are registering a trust as an agent (someone appointed to act on behalf of the trustees) go to: https://www.gov.uk/guidance/ register-your-clients-trust
To update a trust’s details go to: https://www.gov.uk/guidance/manage-your-trusts-registration-service
To register a trust on the Irish register go to: https://www.revenue.ie/en/crbot/how-to-register-on-the-crbot/index.aspx
Who will be able to access the register?
The new rules mean information can be provided to organisations who are concerned with money laundering and terrorist financing. But only in limited circumstances and on request. The information will not be generally available.
HMRC is not obliged to notify or disclose to trustees or beneficial owners that a request has been made, and trustees or beneficial owners do not have the right to appeal against the decision to disclose the information.
What are the penalties for not registering?
Because the rules are being brought in to prevent money laundering and financing terrorism, there is a fixed fine of £100 for failing to register a trust, with potentially higher penalties for a repeated refusal.
And trustees found to be involved in money laundering or terrorist financing may also be subject to separate penalties under the Money Laundering (information on the Payer) regulations 2017 and the Proceeds of Crime Act 2002.
This feels quite complicated, what if I need more help with registering?
We understand that the rules are quite involved and / or you may not feel that you have time to deal with this yourself. You could appoint an agent to deal with the registration process on your behalf for a fee. The HMRC's guidelines say that this must be an accountancy service provider such as an accountant or tax adviser.
If you have arranged your trust through Lloyds Bank Private Banking’s Professional Trustee UK Trust Centre, they will complete the registration as part of their service, and can help you if they arranged a trust you already have.
Any views expressed are our in-house views as at the time of publishing.
This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.
Please note, Schroders Personal Wealth does not provide managed trust services directly although we can advise on some types of packaged trusts. If you require a managed trust, we can introduce you to the Professional Trustee UK Trust Centre in Lloyds Bank Private Banking.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Fees and charges apply at Schroders Personal Wealth and Lloyds Bank Private Banking Professional UK Trust Centre.
In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.
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