New Trust Requirements – Should my trust be registered with HMRC?

The Trust Registration Service (TRS) came into existence in 2017 as part of the adoption by the UK Government of EU Money Laundering legislation. Broadly, the regulations required any existing or newly created trusts that are liable to pay any of the following taxes: income tax, capital gains tax, inheritance tax, stamp duty reserve tax and stamp duty land tax (or devolved administration equivalents), to enter certain data into a Trust Register administered by HMRC.

However, the Fifth EU Money Laundering Directive, commonly known as 5MLD, which took effect for trusts from 6 October 2020, then extended this requirement to now apply to the vast majority of trusts (even non-taxable trusts), unless specifically excluded.

The ability to add non-taxable trusts to the Trust Register was made available by HMRC on 1 September 2021 and a 12-month deadline was set to meet the registration requirements. 

Changes to the current TRS regime as a result of the 5MLD regulations include: 

• The requirement for non-taxable trusts in existence on or after 6 October 2020 to be registered by 1 September 2022 (even where those trusts have subsequently terminated). 
• The requirement for both non-taxable AND taxable trusts created after 5 June 2022 to be registered within 90 days. 
• Necessary updates to the trust information held on the Trust Register for both non-taxable AND taxable trusts to be made within 90 days of the change. 

Some common examples of the types of trusts that now need to register include those holding investment bonds, those holding properties in which beneficiaries are living, and those where the beneficiary receives income direct rather than it flowing through the trust.

Whilst there are potential penalties for not undertaking the relevant actions within the necessary timescales, HMRC have advised that they will initially take a ‘soft landing’ in this regard. 

Unfortunately, the process for trust registration is not entirely straightforward and there are many trustees who remain unaware of this additional compliance obligation and upcoming deadlines. 

It is essential that trustees firstly consider whether their trust does have to be registered and if so, begin the process of trust registration.