It was recently announced that a broader range of trusts would need to be added to the trust register, with a deadline of Autumn 2022. Under new rules, which took effect in October 2020, registration is no longer limited to trusts with a UK tax liability. Instead, to ensure transparency, all existing UK trusts and an increased range of non-UK trusts must register unless they are specifically excluded.
A brief history of the trust register requirements
When obligations for the HMRC to maintain a register of trusts were first introduced in 2017, following the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations, they brought the requirements of the Fourth Money Laundering Directive into effect within the UK. Shortly after, on 9 July 2018, the Fifth Money Laundering Directive took effect, and EU member states were given until 10 January 2020 to enact it. Since the implementation deadline preceded the UK’s exit date from the EU, we were still required to legislate for it in the UK despite Brexit. The changes required by 5MLD are included in The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 which were then introduced in October 2020.
What are the changes?
Under 5MLD, not only do taxable relevant trusts need to be included on the register, but all relevant trusts – unless they are expressly excluded. Through its implementation, the 5MLD significantly increases the number of trusts that need to be included on the register, with estimations of additional registrations in the millions.
This is because the definition of relevant trust under 5MLD is much broader than that under 4MLD and includes non-UK trust, which is not already registered elsewhere in a country that follows regulations similar to 4MLD (broadly the EEA), and either:
- acquire an interest in UK land; or
- have one or more UK trustees and enter into a business relationship with a UK advisory
Who must now report under 5MLD?
For reporting purposes, there are now four types of trust which are required to register under 5MLD. Taxable relevant trusts — which can be UK or non-UK trusts. And the following three types of non-taxable trusts:
Type A — a UK express trust which is not specifically excluded nor registered elsewhere in the EEA.
Type B — a non-UK express trust which has at least one UK-resident trustee and which either acquires land or property in the UK or enters into a business relationship with a relevant person in the UK — provided that it is not excluded nor registered elsewhere in the EEA.
Type C— a non-UK express trust where all trustees are non- UK residents, but the trust acquires land in the UK.
Some important considerations
A trust may move between the taxable, non-taxable (type A), and excluded categories throughout its lifetime. On top of this, the category of taxable relevant trust trumps the excluded list, so a trust which is excluded will still need to register if it acquires a UK tax liability.
There are, of course, exclusions to this list, and whilst they are not as broad as some may have hoped, they are still important to consider and check as to whether a trust may fall into them. The rationale for excluding some trusts is either that they are regarded as low risk for money laundering purposes or because information about them is held elsewhere. The list of trusts excluded from the new requirements is set out in Schedule 3A to the 2020 regulations. There are also exceptions for trusts which arise in commercial transactions, financial markets, and client monies. For example, one guaranteed omission from the list above is a bare trust, which is expected to remain in scope unless they fit into one of the exclusions above.
When will I need to register?
Following regulation guidelines, non-taxable trusts which were set up before 9 February 2022 are required to register by 10 March 2022. However, HMRC confirmed to the professional bodies in a meeting on 11 March 2021 that the trust registration service (TRS) is not yet ready for trustees to use. So the March deadline (and possibly the related February date) will be pushed back to Autumn 2022 to allow trustees around 12 months following the system upgrade to comply.
How can Animo help?
Here at Animo, we understand the above-mentioned may seem confusing for many. Our expert consultants are well versed in performing these services and ensuring that registrations are compliant with Government regulations. If you think that the changes to trust registration may affect you, get in touch with us today, where one of our expert consultants will be able to advise on best practices! Contact us today by calling +44 (0)207 060 0835, emailing firstname.lastname@example.org, or by filling out a contact form below!