Register your trust with HMRC to avoid hefty penalties

The vast majority of trusts created in the UK need to be registered with HMRC’s Trusts Registration Service to comply with anti-money laundering regulations.

This includes all trusts, both taxable and non-taxable trusts, other than those specifically excluded or Schedule 3A trusts.

Trustees who fail to meet HMRC’s regulations may be charged a penalty of £5,000.

The Trust Registration Service

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.

In 2020, the Fifth EU Money Laundering Directive (5MLD), extended this requirement to apply to all trusts (barring some exceptions) whether they be taxable or non-taxable. 

Requirement of trusts under 5MLD 

Now, all taxable and non-taxable trusts that are not exempt must register within 90 days of being created (all trusts created before 6^th October 2020 should have registered before 1^st September 2022). 

Taxable trusts must continue to confirm no changes have occurred by 31 January each year whilst any changes to information held on the TRS must be updated within 90 days. It is the responsibility of the trustees to ensure all information on the trust register is complete and up to date.

HMRC imposing fines

While HMRC initially took a soft landing in regard to potential penalties for trustees not undertaking relevant actions, the revenue is now actively tracking and looking to fine trustees for non-compliance.

Examples of the types of trusts that would not have been required to register prior to the introduction of 5MLD 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. These trusts must be registered with HMRC to comply with the regulations.

Registering a trust

It is essential that trustees firstly consider whether their trust need to be registered and if so, begin the process of trust registration. However, unfortunately, the process for trust registration is not entirely straightforward.

Trustees will firstly need an Organisation Government Gateway user ID and password - this is different to an Individual Government Gateway ID - and a different Organisation Government Gateway ID is required for each individual trust. This convoluted system can be rather frustrating, particularly for lay trustees.