Following our update last year on the planned expansion to HMRC’s Trust Registration Service (TRS) as required by the Fifth Anti-Money Laundering Directive (5AMLD), the expansion has now been fully implemented by HMRC. The TRS opened for registration of non-taxable trusts on 1 September 2021.
Registration requirement widened to include non-taxable trusts
Prior to the implementation of 5AMLD, the TRS registration requirement was linked to taxation and applied only to trusts with UK tax liabilities. 5AMLD removes the link to taxation and significantly widens the registration requirement. The obligation to register a trust with TRS now extends to all UK express trusts and some non-UK express trusts unless the trust falls within one of the excluded categories.
The following trusts are excluded from the registration requirement:
- trusts imposed by statute, including trusts arising from bankruptcy
- trusts imposed by court order
- UK-registered pension scheme trusts
- life policy trusts where the policies pay out only on death
- UK charitable trusts, including charities which are not required to be registered with the Charity Commission and with income of less than £5,000 per year
- pilot trusts established before 6 October 2020 with assets worth less than £100
- co-ownership trusts where the trustees and beneficiaries are the same
- trusts for bereaved children, 18–25 trusts and disabled persons trusts
- trusts for the maintenance of outstanding historic buildings
- will trusts which come into effect on death provided they hold the assets for no longer than two years after death
- trusts holding life policy benefits received after the assured person’s death provided they hold the assets for no longer than two years after death
- trusts created in the course of professional services or business transactions for holding client assets.
HMRC has recently provided additional guidance to confirm that amendments will be made to the relevant legislation to ensure that trusts required for children’s bank accounts and trusts holding healthcare insurance policies will fall within the definition of excluded trusts and therefore be exempt from the requirement to register.
Where a pre-existing, non-excluded trust was in existence on or after 6 October 2020, it must be registered by 1 September 2022.
For new trusts created after 1 September 2022 where registration is applicable, the deadline for registration is 90 days from the establishment of the trust.
While relevant trusts created before 1 September 2022 will generally be required to register by 1 September 2022, HMRC has confirmed that additional time will be given if the trust has been created within 90 days of the deadline (ie 1 September 2021). In such cases, HMRC will allow 90 days from establishment of the trust for registration.
Any changes to the trust and its circumstances must be notified to HMRC via the TRS system within 90 days of the change.
It is also important to remain aware of the 5 October 2021 deadline for trusts that first became liable for income tax and/or capital gains tax in the 2020/21 tax year. For example, if a new trust created in November 2020 received investment income from December 2020, the first income tax liability will be in the 2020/21 tax year and the trust will require to register by 5 October 2021.