The registration deadline of 1 September 2022 is looming.

The introduction of trust registration in 2017, initially for taxpaying trusts to comply with the fourth anti-money laundering directive, was fraught with difficulties. Agent access was delayed while the agent services account was hurriedly introduced and a temporary iForm was used until the full trust registration service (TRS) was developed in 2020.

Registering on the TRS is linked to registering for income tax self assessment. The system is also used to register estates, although estates could have been kept outside the scope of the anti-money laundering regulations.

On 6 October 2020, the requirement to register a trust was extended to all UK express trusts and some non-UK trusts to comply with the fifth anti-money laundering directive (even though the UK was not obliged to implement either of the directives). The requirements now cover non-taxable trusts unless the trust is specifically excluded. The TRS opened for registrations of non-taxable trusts in September 2021.

In January 2022, a further statutory instrument was laid that:

• extended the registration deadline for non-taxpaying trusts from 10 March 2022 to 1 September 2022;
• extended the post-2022 registration deadlines from within 30 days of the trust becoming registerable to within 90 days of the trust becoming registerable;
• extended the time limits for keeping information held on TRS up to date from within 30 days of the trustees becoming aware of the change to within 90 days of the trustees becoming aware of the change.

This timetable allows almost two years since the requirements were enacted and one year since the system opened for registration of the extended population. A sensible time frame, but the deadline is now just under three months away.

Many trustees and advisers are unlikely to be aware of the requirement to register and may remain so given that it may not always be obvious that there is a trust and there will be no payment of tax that might prompt action. The fact that registration is not linked to a tax payment also makes the requirement rather tangential to other HMRC activities.

Which trusts need to register?

Full details of the trusts that need to register are available in HMRC’s Trust Registration Service Manual.

In general, all UK express trusts are now required to register on the TRS unless they are excluded from registration under one of the exclusions listed at TRSM23000. Non-UK express trusts may be required to register if they have links to the UK, such as having UK-based trustees, acquiring land in the UK, or entering into a business relationship with a UK business. Any express trust with a liability to UK tax is required to register on the TRS and has been since 2017.

The exclusions include:

• trusts imposed by statute, where these do not result from the clear intention of the settlor. For example, the statutory trust arising on intestacy;
• UK registered pension trusts;
• charitable trusts regulated in the UK (or not required to register with the Charity Commission under the Charities Act 2011);
• pure protection life insurance policies and those paying out on critical illness or disablement, including group policies;
• trusts holding policies that contain temporary disablement cover and trusts holding healthcare policies;
• trusts used by government and other UK public authorities;
• trusts for vulnerable beneficiaries or bereaved minors;
• personal injury trusts;
• save as you earn schemes and share incentive plans;
• maintenance fund trusts;
• certain trusts incidental to commercial transactions;
• certain trusts used as part of financial markets infrastructure;
• authorised unit trusts;
• co-ownership trusts, where the trustees and beneficiaries are the same persons
  (eg, for jointly holding properties);
• will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy and are wound up within two years of death;
• existing trusts holding assets valued at less than £100 unless or until further assets are added (pilot trusts);
• trusts created in the course of setting up a bank account for minors or vulnerable persons; and
• child trust funds and Junior ISAs.

Representations made to government have proposed additional exemptions such as for professional trustees. However, the government does not appear minded to add any further exclusions to the two small changes made by The Money Laundering and Terrorist Financing (Amendment) Regulations 2022, SI 2022/137.

Registration date

Although the deadline for registering non-taxable trusts has been extended to 1 September 2022, the obligation to register extends to all trusts that are in scope and that were in existence on 6 October 2020 (the date on which the regulations were laid).

HMRC’s view is that this means trusts that have been closed since that date still need to be registered and then immediately closed. It also means that trustees who have resigned since 6 October 2020 need to be included on the register. A quirk of the TRS means that the date of their resignation cannot be entered on the TRS as it cannot accept a date that is earlier than the date on which the trust was registered.

Penalties

There are, as yet, no specific penalties for failing to register a non-taxpaying trust or for failing to update the register. However, HMRC does have recourse to penalties for breaches of anti-money laundering regulations in appropriate cases. Members who become aware of a failure to register, or a failure to update the register will need to approach this in the same way that they would any other breach of money laundering regulations.

Access to information on the register

From 1 September 2022, someone who can demonstrate a legitimate interest can access certain limited information on the beneficial ownership of trusts registered on the TRS as a registrable express trust. Trusts that are registered only because of a liability to UK taxation are not subject to these third-party access provisions. However, law enforcement authorities can still make requests for information on the register regarding these trusts.

There is a separate provision for access to information about a trust if it holds a controlling interest in an entity that is in a third country.

There are protections for minor and vulnerable beneficiaries and to cover situations where releasing information would create a serious risk.

Further details of how HMRC will manage access requests are still being developed.

Further information

ICAEW guidance on the TRS is contained in TAXguide 14/20 Trust Registration Service and HMRC guidance on the TRS extension is available at Trust Registration extension – an overview.

The relevant regulations and legislation include The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692, as amended by The Money Laundering and Terrorist Financing (Amendment) Regulations 2019, SI 2019/1511, and The Money Laundering and Terrorist Financing (Amendment) Regulations 2022, SI 2022/137.

About the author

Caroline Miskin, Senior Technical Manager, Digital Taxation