Trust Registration Service: new obligations for trustees

The UK Trust Registration Service (TRS) was first introduced in 2017 to enact the EU Fourth Money Laundering Directive (4MLD). It currently requires all trusts with UK tax liabilities to register with the TRS and populate it with certain information on their settlors, beneficiaries, power holders and assets.

The UK tax liability includes any of the following:

• Income Tax
• Capital Gains Tax
• Inheritance Tax
• Stamp Duty Land Tax
• Stamp Duty Reverse Tax

There was also a requirement to keep the Trust Register up to date with any changes to the persons connected with the trust and their personal details. However, it was not initially possible to view and update the Trust Register for any changes so this part of the obligations under 4MLD was pushed back.

Reporting changes

Under 4MLD, there is now the requirement for all trusts required through the TRS to be updated on an annual basis by way of an annual declaration. Consequently, trustees are now required to update the data on the register for any changes by 31 January following the tax year in which the change occurred. Even if there are no changes to trust data in a tax year, but the trust has incurred a tax liability during the period, the trustees must confirm via the TRS that no changes have occurred and that the details on the register are accurate.

If there was no UK tax liability in the tax year the change occurred, the requirement to update is deferred until the 31 January following the next tax year in which a tax liability arises.

Fifth Money Laundering Directive: new obligations

The UK has now implemented the EU’s Fifth Money Laundering Directive (5MLD), which took effect on 6 October 2020. As part of the 5MLD, significant changes are being made to the Trust Register. The main changes are as follows:

1. All UK trusts (apart from certain excluded trusts) will have to register under the TRS and make annual declarations, whether or not they have UK tax liabilities.
2. Those trusts which are already registered will have to provide some additional information about their beneficial owners, such as their country of residence and nationality.
3. Non-EEA Trusts will be required to register if they enter into a business relationship with a UK service provider or
   acquire UK real estate.
4. Third parties will be able to access information on the register.
5. Trustees will be required to supply the trust’s registered beneficial ownership information to any service provider
   with which they enter into a business relationship. Service providers will have to report any discrepancy
   between the information on the register and the information obtained as part of their due diligence
   obligations.
6. Trustees will have only 30 days from the creation of a trust or from the date of any changes to the beneficial
   owners of the trust to report the relevant information. These changes will create significant additional
   compliance obligations for many trustees.

What should trustees be doing?

For the time being, the rules requiring registration of trusts which have UK tax liabilities are the same as before.
Registration is generally required either by 5 October or 31 January after the end of the tax year in which the tax
liability arises. For these trusts, the annual declarations also need to be made by 31 January where appropriate.

For other trusts (i.e. those that do not have UK tax liabilities), the upgraded trust registration system will only become available during the course of 2021 and so trustees cannot get ahead of the game by starting to register now even if they wanted to do so.

Find out more in our fact sheet

If you need professional tax advice to register a trust or maintain ongoing administrative compliance for 5MLD, please get in touch with our friendly team of advisers.