The Trust Registration Service or TRS is a register showing the underlying ownership of trusts. The service is accessed online, and trustees or their agents must register the details of a trust under their control, in order to comply with their obligations under the anti-money-laundering legislation. The obligation to register a trust was previously limited to express trusts with UK taxable consequences. It applies to any trusts which have incurred a liability to pay income tax, capital gains, tax, inheritance tax or stamp duty land tax.
The latest Money Laundering Directive on this subject, MLD5, came into force on 6 October 2020. From that date, trustees entering into a business relationship, or acquiring an interest in land or property, triggers the requirement for registration. MLD5 has widened the scope of trust registration a great deal, by removing its link with taxation. This means not only that taxable trusts are now required to register, but also many non-taxable trusts are being brought within the scope of the legislation. All UK trusts and some non-UK trusts are now required to register, unless they are on the short list of exempt trusts. Even bare trusts are now required to register, although trusts required in order to open a bank account for a child by their parents are excluded from registration.
Which types of trust have to register?
There are now four categories of trust that are required to register with the Trust Registration Service. These are: –
- Taxable relevant trusts
- Non-taxable relevant trusts, which are divided into: Type A: express trusts; Type B: non-UK express trusts with at least one UK resident trustee, which acquire land or property in the UK or enter into a business relationship with a relevant person in the UK; and Type C: non-UK express trusts where all the trustees are non-resident, which acquire land or property in the UK. Type A covers nearly all UK express trusts. This brings into the scope of the legislation many types of trust which were never previously required to register. In particular, this applies to an immediate post death interest trust (known in the trade as an”IPDI” or a “property protection trust”). These are commonly used by couples who own a property together and wish to protect a share of the property for the surviving owner to benefit from following the first death, without making an outright gift of it to them. This type of trust will now need to be registered if it still exists on the two year anniversary of the date of death, regardless of whether or not a tax liability has been incurred by the trust. Complex estates must also be registered with the TRS, whilst going through the probate process, if the total income tax and CGT due during the administration period is more than £10,000, the value of the estate was more than £2.5 million at date of death and/or the value of the estate assets sold by the executors in a tax year was more than £500k. This is how the unique taxpayer reference or ‘UTR’ is now obtained in a complex probate case.
Which trusts are exempt from registration?
The trusts most relevant to Wills and estate planning which are not required to register with the Trust Registration Service are Will trusts, as long as they only accept assets from the deceased’s estate and are wound up within two years of the death. The start date of the trust is the testator’s date of death. If the trust still exists on the two year anniversary of the testator’s death, it has to be registered. It will also need to be registered earlier than the two year anniversary if it accepts assets from outside the estate, or if it incurs a UK tax liability in the meantime. Bereaved young persons trusts and disabled persons trusts in Wills are also exempt.
Charitable trusts are excluded from registration, as are trusts with an annual income below £5000, trusts that arise out of intestacy or bankruptcy and trusts set up to hold compensation payments. Pilot trusts holding less then £100 created before 6 October 2020 are not required to register. Pilot trusts trust set up after that date are required to register, even if the trust holds less than £100.
Co-ownership trusts which arise when people own land and property jointly, as well as joint bank accounts, do not require registration. Changing the title to a property from joint tenants to tenants in common does not in itself mean that the trust automatically requires to be registered. Pension scheme trusts and trusts holding insurance policies are exempt.
What information is needed to register with the Trust Registration Service?
Where registration is required, the amount of information supplied depends on whether or not the trust is taxable. The trustees of a taxable trust have to give more information than those of a non-taxable trust. The key information required for all trusts includes, as one would expect, details about the trust itself, the trustees, the beneficiaries and anyone with control over the trust, such as a protector.
The duty to register the trust rests with the trustees. A Will trust is not created until after death, and trust registration should be carried out, if required, as part of the probate process. There is no need to register a Will trust routinely as soon as a Will is signed. It is thought that there are many thousands of trusts that should now be registered which are controlled by lay trustees who have no idea of the requirements. As a result, there are relatively lenient penalties for non-compliance. Trust registration is dealt with on HMRC’s website here.
Chiltern Wills is a Will writing business based in Beaconsfield and run by former London solicitor Rebecca D’Arcy. Call us on 01494 708688 or email info@chilternwills.com for a free initial conversation about how we can help you with Wills, Lasting Powers of Attorney or Probate work.
