The Trust Registration deadline is looming – are you prepared?

The fifth anti-money laundering directive was introduced across the European Union (EU) back in 2018. EU member states, including the UK, were required to implement this directive into national law by January 2020, with the aim of preventing the use of the financial system for money laundering and terrorist financing.

In light of the new directive, the UK government introduced a new set of registration rules for trusts, meaning that all trusts (with a few exceptions) must be registered with HMRC via the Trust Registration Service (TRS). The TRS was originally introduced in 2017 and was previously only relevant for trusts that had incurred tax liabilities.

The legal duty to comply with the new reporting requirements lies with the trustees, and failure to comply, may result in a penalty being charged against the trust.

Here is everything that you need to know about the TRS and the new reporting obligations for trustees.

Deadline

The registration deadline for existing UK trusts (with a few exceptions) and some non-UK trusts is the 1^st of September 2022. This deadline also applies to trusts that were in existence on the 6^th of October 2020 and have since been closed.

Moving forwards, new trusts created on or after the 1^st of September 2022 are required to be registered by the trustees within a 90-day period. In addition, any changes to new or existing trusts must be updated with the TRS within 90-days.

Which trusts need to be registered?

Trusts, unless exempt, must be registered with the TRS regardless of whether they pay tax or not.

The following trusts are exempt from registration with the TRS unless they are liable to pay tax in the UK:

Trusts that hold money or assets of a UK-registered pension scheme
Trusts holding life or retirement policies providing that the policy only pays out on death, terminal or critical illness, permanent disability, or to meet the healthcare costs of the life assured
Registered charities in the UK
Pilot trusts established prior to 6 October 2020 which hold no more than £100
Co-ownership trusts where the trustees and beneficiaries are the same people
Trusts created by statute. For example, created on intestacy or bankruptcy
Trusts holding insurance policy proceeds (only) following the death of the life assured and providing the funds are paid out from the trust within two years from the date of death
Commercial or financial established for business-related transactions or professional services which hold client money or other assets

How to register a trust

There are two ways that you can register trusts with the TRS:

The trustees can authorise an ‘agent’ to register the trust on their behalf – but it is only possible to register as an agent if operating as an accountancy service provider
The trustees can register the trust, with one trustee designated as the ‘lead trustee’ for HMRC correspondence (for most trusts, the registration process is straightforward)

The process the lead trustee needs to take in order to register trusts with the TRS themselves is noted below:

Obtain an Organisation Government Gateway user ID and password if you do not already have one at https://www.gov.uk/guidance/register-a-trust-as-a-trustee
Input details of the trust. You will need the following information:

- The name of the trust
- The date the trust was created
- To say whether the trust is an express trust or not – in most cases, this means whether the trust is deliberately set up by a settlor rather than the courts. Most trusts are express trusts
- Details about whether a non-UK trust has a business relationship in the UK
- Details about any UK land or property the trust has purchased

3. Nominate a lead trustee and input their details as per the following:

- Name
- Date of birth
- National Insurance Number and address if a UK citizen (Passport details and address if not)
- Telephone number
- Country of residence
- Country of nationality

4. Add details of any deceased settlors (the person who originally held the assets put into the trust). You will need to input the following:

- Full name
- Date of birth
- Date of death
- Last known country of residence
- Last known country of nationality

5. Details of any living settlors, trustees and beneficiaries. You will need the following for each:

- Name
- Date of birth
- Country of residence
- Country of nationality
- Mental capacity at the time of the registration with the TRS

Following the registration, the lead trustee will shortly receive a Unique Reference Number (URN).

Ongoing requirements

The lead trustee can use the online service to view or amend the details for any registered trust(s). If there are any changes to the trust details or beneficial ownership, the lead trustee should update the information on the TRS within 90 days of the date that the trustees become aware.

If the trust is taxable, the lead trustee must declare the trust is up to date on an annual basis by 31 January. If the trust is non-taxable, there is no need to make this annual declaration.

Penalties

HMRC have indicated that penalties will not automatically apply, and they will instead review this on a case-by-case basis.

However, failing to register trusts or update any changes on time could result in HMRC levying the following fines against the trustees:

£100 penalty for registration or updates made within 3 months of the due date
£200 penalty for registration or updates made between 3 months and 6 months of the due date
£300 penalty if more than 6 months late
£5,000 penalty (per offence) if the Trustees deliberately fail to register a Trust on the TRS

HMRC also have the ability to levy fines and charge interest for any tax liabilities that have not been declared and or paid as well as penalties for money laundering offences.

How can we help

We recognise that there is (initially at least) a lot of information required to register each trust with the TRS, so many people may prefer to ask their accountant to submit the information on their behalf.

Whether you do this or wish to submit the application as the lead trustee, we are currently in the process of writing to all our clients providing a summary of the information we currently hold on all the relevant trusts concerned. We recommend contacting your Clarion Financial Planner if you have any trusts that you have not yet made us aware of.

We are also happy to answer any queries you or your accountant might have, however please note that Clarion is not an authorised accountancy service provider, and we are therefore unable to register trusts on your behalf.