Trust Registration Service

Background

The Trust Registration Service (TRS) is a register of express trusts that have a liability to pay one of the following taxes: capital gains tax, inheritance tax, stamp duty land tax (SDLT) and stamp duty reserve tax. It was introduced in 2017 by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and set out in EU’s Fourth Money Laundering Directive.

The scope of the TRS was extended by the Fifth Money Laundering Directive implemented by the Money Laundering and Terrorist Financing (Amendment) Regulations 2020 which came into effect on 6^th October 2020. Since the Fifth Money Laundering Directive, all trusts (whether taxable or not) need to be registered on TRS unless the trust is specifically excluded.

The trusts caught in the new scope include all UK express trusts and some non-UK express trusts, in existence on or after 6^th October 2020.

In simple terms, an express trust is created by a settlor by way of a written document, such as a Will, deed, or declaration of trust, to take effect either during their lifetime or after their death. Trusts which are implied, arise on intestacy or are created by court orders are not express trusts which are subject to TRS.

Trustee Responsibilities

If you are a trustee of a trust that is registrable, you are expected to register the trust on TRS via the Government Website or arrange for an agent such as an accountant or solicitor to register the trust.

It is important to note that trusts that were in existence on or after 6^th October 2020 but have been closed since need to be registered on TRS and then the trust record must be closed.

Declarations of Trust

Co-ownerships trusts such as declarations of trusts set up by joint property owners to hold property for themselves as tenants in common are excluded from TRS registration requirements. However, the exclusion does not apply if the legal and beneficial owners are not identical. For example, in a scenario where there are two people on the title of the property but three people have a beneficial interest in the property, the trust would need to be registered on TRS.

Penalties

HMRC may issue financial penalties on the failure to register a trust or for late registration of a trust.

There is no penalty for a first offence to register a trust or for late registration of a trust unless the failure to do so is due to deliberate behaviour of the trustee. Where HMRC finds that the failure to register a trust has been deliberate, HMRC may impose fines of £5,000 per offence.

HMRC have stated that they will initially adopt a light touch to penalties if trusts are not registered by 1^st September 2022 given the new registration requirements.

More information about the TRS can be found in the HMRC Trust Registration Manual

For further advice and assistance please contact our Private Client Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk