Recent years have seen an increasing drive on a global scale to combat the threats of tax evasion, money laundering and terrorist financing. A number of these measures affect trustees, imposing broad and onerous compliance obligations.
Rules contained within The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 first introduced the concept of the Trust Registration Service (TRS), which acts as both a register of beneficial ownership of trusts, and a mechanism to register trusts for UK self-assessment. This originally required trustees of taxable trusts to register on the TRS and thereafter keep information up to date.
Further amendments to the regulations increased the scope of the TRS to encompass all express trusts (breaking the tax nexus), requiring trustees to register by 1 September 2022 and thereafter report any changes in beneficial ownership or the creation of any future express trusts within 90 days.
Extent of the Trust Registration Service
Subject to specific exclusions, these changes will not only catch trustees of “traditional” trust structures holding dormant assets (express trusts holding private company shares/loans/
property/investment bonds, which were previously exempt from reporting as non-taxable), but will also encapsulate the separation of legal and beneficial ownership of assets, bringing simple trusts (more commonly known as “bare trusts”) into scope.
While a concession has been granted for the holding of deposit accounts and Junior ISAs for minors, this will not extend to the holding of other assets, bringing property and investments held for others into the reporting net.
What information is required?
Records of beneficial owners
Under the regulations trustees must hold and maintain accurate written records of the beneficial owners of the trust, and of any potential beneficiaries named in trust documents. Beneficial owners are defined in the regulations as the settlor, trustees, beneficiaries, or class of beneficiaries, and any individuals who have control over the trust.
These records must include the names, dates of birth and national insurance numbers (or address/passport details) of the beneficial owners, as well as country of residence, nationality, and the nature/extent of their beneficial ownership.
HMRC'S Trust Registration Service
In addition to maintaining private records of beneficial owners, trustees must also register elements of this information with HMRC, with more stringent requirements for trusts that are subject to tax in the UK. This information is held on a trust register and must be kept up to date by the trustees.
Intermediaries such as solicitors, accountants or investment managers must request an extract of the TRS when the trustees enter into a new business relationship, reporting any discrepancies to HMRC.
Access to the TRS is otherwise currently restricted to UK law enforcement, as well as anyone who can demonstrate a “legitimate interest” in the information.
Trustees who fail to register or update details within the time limit are likely to first be sent a nudge letter setting out their responsibilities. Subsequent offences of failure to update details within the time limit would attract a fixed penalty of £100 per offence, with any trustees found to have deliberately failed to register subject to an immediate fine, rather than a notification.
How can we help?
Trustees of non-excluded trusts should be prepared to provide beneficial ownership information to HMRC on a central register of trusts within 90 days of creation and keep the register up-to-date.
We can assist in registering any trusts on the TRS.
For further information, please get in touch with any of the key contacts listed above or your usual contact at Stevens & Bolton.
The information contained in this guide is intended to be a general introductory summary of the subject matters covered only. It does not purport to be exhaustive, or to provide legal advice, and should not be used as a substitute for such advice.
James Hardaker
Duncan McGowan