Trust registration – the new 2020 legislation

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Changes to Trust Registration imposed by the 5th Money Laundering Directive

The new 5th Money Laundering Directive (5MLD) which became law on 10 January 2020 now requires all trusts to be registered with HM Revenue & Customs (‘HMRC’).

Under the previous directive, only express trusts (those expressed in writing via deed/wills) with tax liabilities had to register.  This has now been widened extensively to provide greater transparency on the beneficial ownership of wealth, and will apply irrespective of the Brexit negotiations.

A technical consultation document was issued by HM Treasury on 24 January 2020, with a closing date for comments of 21 February 2020. The below may therefore be subject to change once this consultation has concluded.

Which trusts must register with HMRC?

All UK resident express trusts (including many types of bare, charitable and employee benefit trusts) and non-UK resident trusts that acquire UK land and property. This includes trusts that did not have a tax liability and were consequently not caught by the previous requirements.

The recent consultation document has stated that trusts used solely to hold insurance policies, vulnerable beneficiary and personal injury trusts, charitable trusts and registered pension schemes held in trust will not be required to register. Trusts created by law (e.g. by court order or where someone died without a will) are not caught either.

The consultation is continuing with regard to whether scenarios such as a designated account will be exempt from registration (i.e. where an adult is shown as the nominee on an account designated for a child), together with certain other types of bare trusts.

Who needs to register

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.  The trustees can appoint an agent to complete the registration process if they wish.

Deadlines

Trusts in existence on 10 March 2020 have a proposed registration deadline of 10 March 2022.  However, if these trusts want to have a business relationship e.g. with a financial adviser or a bank, after 10 March 2020, they may need to provide evidence from the trust register, therefore may need to register sooner.

For new trusts created after 10 March 2020, they must register within 30 days of being established or by 10 March 2022, whichever is later.

Trusts set up after 10 March 2022 will have 30 days to register.

How to register

Trustees must set up a Government Gateway account and obtain a unique taxpayer reference (UTR) for the trust.  Alternatively, an agent can do this on their behalf.

Information needed to register a trust

    • Name of the trust
    • Type of trust
    • Date the trust was created
    • The trust’s UTR – 10 digit reference issued by HMRC (if it has one)

Trustees

    • Name
    • Date of birth
    • National Insurance number and address (if UK citizen)
    • Passport details and address (if not a UK citizen)
    • Telephone number (for lead trustee only)

Other individuals and organisations involved in the trust (incl living settlors, protectors, beneficiaries)

    • Name
    • Date of birth

and one of the following:

    • National Insurance number (if a UK citizen)
    • Address
    • Passport details and address (if not a UK citizen)

Additional details are needed where the settlor has died.

Beneficiaries

Details of all known beneficiaries who can benefit from the trust must also be provided.  If there are more than 10 beneficiaries in any one class of beneficiary, the trustees must keep a note of the additional beneficiaries.

Named beneficiaries – details of all individuals, charities, trusts and organisations named in the trust deed must be given.

Potential beneficiaries – some beneficiaries will only benefit when a certain event happens (e.g. on the death of another beneficiary).  These ‘potential beneficiaries’ can be included as a class of beneficiaries until the event occurs.  At that point, their details must be included on the trust register.

Assets

The asset information needed will depend on the type of trust and when it is registered:

    • Descriptions, quantities and value when the trust received them (for existing trusts) or when you register the trust (for new trusts).

FAQs

Is the data on the trust register available to the public?

Not currently but the register will become available to those with a legitimate interest (for money laundering or anti-terrorism purposes).

Are there penalties for non-compliance?

Under the current 4MLD requirements the minimum was £100 for late registrations done within 3 months of the deadline, but up to the higher of £300 or 5% of the total tax liability for registrations not done within 6 months.  Consultation for penalties for the 5MLD registrations is underway with suggestions that they be lower as there may not be a tax liability.

Is this a one-off or will trustees have to regularly update the register?

Any changes to the trust e.g. change of trustee, change of address, change in beneficiary or entitlement need to be updated on HMRC’s trust register.  Changes can be made online.

Are trusts holding non-income or capital producing assets caught?

Yes. Many trusts have lay trustees and there is a possibility that they will be unaware of their responsibilities especially for trusts which only contain a non-income producing bond for example. 

Most trusts established since 22 March 2006 fall within the inheritance tax regime.  If the value of the capital in the trust exceeds the available nil rate band at the 10 year anniversaries of the trust, there could potentially be a charge to inheritance tax (at up to 6%).  In addition, if the value of the trust assets exceeds 80% of the value of the nil rate band on the 10 year anniversaries of the trust, reporting to HMRC is required on form IHT100.   

The tax team in Paradigm Norton has experience of registering trusts with HMRC. If you have any questions about a trust that you have connections with, please speak to your existing adviser, or give us a call today on 01275 370670. We would love to hear from you.

This article has been published for educational purposes only and should not be considered investment advice or an offer of any product for sale and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. The Financial Conduct Authority does not regulate tax planning.