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VIEW ALLThis note explains changes to the Trust Registration Service (TRS) relating to the extension of the registration requirement to include non-taxable express trusts (including bare trusts).
It also sets out the forthcoming deadlines for first registration of such trusts.
An obligation introduced in 2017 for UK and non-UK taxable trusts to register on HMRC's Trust Registration Service (TRS) has been extended to include all UK express trusts, unless specifically excepted, and certain non-UK express trusts.
Among other changes, the registration requirement now applies to many types of bare trusts, also known as nominee relationships. Bare trusts were not required to register under the original rules for taxable trusts, as any tax liability arising belonged to the underlying beneficial owner rather than the trustee.
The new rules came into effect on 6 October 2020 and the deadline to register express trusts established on or before 3 June 2022, or any that have ceased to exist since 6 October 2020, is 1 September 2022.
Trusts that come into existence on or after 4 June 2022 should be registered within 90 days of creation.
In 2017, following the implementation in the UK of the EU's 4th Anti-Money Laundering Directive, an obligation was introduced for trustees with a liability to one or more specified UK taxes (taxable relevant trusts) to register their trust on HMRC's Trust Registration Service. This obligation continues and the relevant taxes are as follows:
Capital Gains Tax (CGT);
Income Tax;
Inheritance Tax;
SDLT (or LBTT in Scotland or LTT in Wales);
Stamp Duty Reserve Tax.
In 2020, the UK implemented the EU's 5th Anti-Money Laundering Directive, which extended the scope of the Trust Register.
In addition to UK or non-UK taxable relevant trusts, the requirement to register on the TRS will apply to the following classes of trust:
Type A trusts: UK resident express trusts that are not registered in the EEA, unless expressly excluded;
Type B trusts: non-UK resident express trusts that have at least one UK resident trustee, and the trustees of which on or after 6 October 2020:
enter into a business relationship with a UK relevant person that has an element of duration (for example, lasts or is likely to last for at least 12 months), or
acquire an interest in UK land;
Type C trusts: non-UK resident express trusts that acquire an interest in UK land on or after 6 October 2020, that do not have a UK resident trustee.
The meaning of "express trust" is not defined in the new rules. However, in guidance, HMRC have indicated that an express trust is one created deliberately by a settlor, usually in the form of a document such as a written deed or declaration of trust.
Such a trust can be created either to take effect during the settlor’s lifetime, or by will, to take effect on death.
Some (non-exhaustive) examples of non-taxable express trusts that may be caught under the extended rules include the following:
Certain trusts do not need to register on the TRS unless they are liable to pay UK tax. Broadly, these include:
Trusts which are not set up deliberately by a settlor but are imposed by Courts or created by legislation, are not ‘express trusts’ and therefore do not have to register unless they are liable to tax. Examples of such trusts include a trust:
Some financial products and arrangements with ‘Trust’ in their description, such as the Child Trust Fund or Venture Capital Trusts, are not really trusts and so do not have to be registered.
Trustees are obliged to keep the trust register up to date. The deadlines for doing so are as follows:
Trustees of Type A and Type B trusts are required to tell HMRC when they hold a controlling interest in a third country entity.
Broadly, trustees are regarded as having a controlling interest in an entity if they hold directly or indirectly more than 50% of the shares or voting rights in the entity, or a right to appoint or remove a majority of the directors, or they have the right to exercise, or actually exercise, significant influence or control over the entity.
A third country entity is a body corporate (such as a company), partnership or other entity that is governed by the law of a country or territory outside the UK and the EEA (EU, Norway, Iceland or Liechtenstein, and that is a legal person under that law.
Trustees of Type C trusts are not required to provide information on controlling interests in third country entities.
Law enforcement agencies can already obtain information on the register about a trust and its beneficial owners to help counter money laundering and terrorist financing. In the future, individuals and organisations may be able to request specified information about the beneficial owners of trusts, other than Type C trusts, in certain, limited circumstances.
HMRC will not give information about beneficial owners if they are minors, lack mental capacity or are at risk of, for example, blackmail, extortion, violence or intimidation as a result of releasing that information.
This note provides a brief outline only of the expanded TRS rules. If you are the settlor or trustee either of an existing trust or one that ceased to exist on or after 6 October 2020, that is not already registered on the TRS, please get in touch with a member of our Private Client team or with your usual Howard Kennedy contact.
We will be able to review with you whether your trust is registrable and determine how best to ensure that this is achieved by the relevant deadline.
Record keeping obligations for trustees of non-registrable trusts
Even if a trust is excluded from the requirement to register on the TRS as it falls within one of the specific exclusions, there may still be a requirement for the trustees to maintain written records of the beneficial owners of the trust. If you have any questions about possible record keeping requirements that may apply to a trust of which you are settlor or trustee, please also get in touch with a member of the team.
Our lawyers are experts in their fields. Through commentary and analysis, we give you insights into the pressures impacting business today.
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