HMRC’s Trust Registration Service: Important Changes

The broadening of HMRC’s Trust Registration Service (TRS) is the latest in a string of laws and policies introduced by the government to tackle the threat of money laundering, terrorist financing and tax evasion.

The widened requirement to register certain trusts with the Trust Registration Service is, without a doubt, a broad and onerous compliance obligation for many trustees. Indeed, the extension to the TRS catches trusts that arise in relatively ordinary situations where it might not be immediately obvious that there are any additional compliance formalities necessary.

It is very important that you understand how the recent changes to the Trust Registration Service may affect you and your trust. The deadline was 1 September 2022 to register trusts with the TRS.

What has changed?

When the Trust Registration Service was initially rolled out in 2017, trusts were only required to be registered where there was a UK tax liability. The relevant taxes are: income tax, capital gains tax, inheritance tax, stamp duty land tax (and Scottish and Welsh equivalents) and stamp duty reserve tax.

In 2020, following the introduction of the Fifth Money Laundering Directive (5MLD), the TRS extended to non-taxable trusts (other than those specifically excluded). It applies to all UK trusts in existence on 6 October 2020, whenever they were created and even if they have since ended. Such trusts need to be registered on the TRS by the trustees or their agent before the September deadline.

Which trusts need to be registered?

Bare trusts (where someone hold the trust funds on behalf of someone else) and express trusts (unless specifically excluded by HMRC) are caught by the new requirements. The Trust Registration Service will also capture any situation where the legal and beneficial owners are not the same, for example where parents have contributed a deposit towards a property purchase for their child which they gain back on sale.

What is excluded?

Certain express trusts are set up for limited purpose and HMRC deems these unlikely to be used for money laundering or financing terrorism. These trusts are specifically excluded from having to register with Trust Registration Service unless they are taxable in the UK.

Some notable exclusions are:

  • UK charitable trusts;
  • ‘Pilot’ Trusts set up before 6 October 2020 and holding assets worth less than £100;
  • Trusts imposed by statute (e.g. intestacy or bankruptcy);
  • Trusts with life policies paying out on death, terminal illness or disability (as opposed to life policies used as an investment);
  • Co-ownership trusts where the legal co-owners and underlying beneficial owners are identical;
  • Will trusts created by a person’s Will and coming into effect when they die (as long as they only hold the estate assets for up to 2 years after the deceased’s death); and
  • Trusts for bereaved children under the age of 18, or adults aged 18 to 25, set up under the Will or intestacy of a deceased parent, or the Criminal Injuries Compensation Scheme.

HMRC’s full list of exclusions can be found in the Trust Registration Service Manual, which can be accessed here.

How to register your trust

The Trust Registration Service is an online system and is accessed through HMRC’s website. The registering trustee, known as the ‘Lead Trustee’, will need to set up a Government Gateway User ID and input details of the trust, including details of the trust’s assets and its beneficiaries, into the online form.

You can choose to instruct an agent to register your trust with the TRS on your behalf. Anthony Gold LLP would be pleased to assist you with this on a fixed fee basis.