HMRC has announced set backs in the timetable for registering the new forms of Registrable Express Trusts, for the 5th Money Laundering Directive (5MLD), on the Trust Registration Service (TRS).
The systems for the additions to the TRS are not expected to be ready this Spring as originally planned, and will be postponed until some point this Summer. Because of this they are also putting back the date for completing registrations to March 2022, this will allow an extra 12 months from when the TRS is up and running properly.
At present it’s only tax paying trusts that are registered on TRS – which are now called Registrable Taxable Trusts. They are not affected by the timing changes, and anyone with such a trust should have it registered by 5 October after the tax year of any liability arising (if Income Tax or Capital Gains Tax payable) or by 31 January (if Inheritance Tax, Stamp Duty Land Tax, or Stamp Duty Reserve Tax).
A new TRS Manual is currently being prepared to guide HMRC staff and the public, which will be an invaluable tool. This should come out shortly before the TRS opens for new registrations under 5MLD. In the meantime, some draft guidance was posted earlier this year on gov.uk – however some points in the draft still need clarification. Due to the simplification of the draft needed to meet government criteria, there are elements still needed to give proper, detailed technical guidance – this should be available in the manual once released.
Registrable Express Trusts
All express trusts now have to be registered on the TRS, unless within one of the exclusions in Sch 3A to the regulations.
Even though you can’t yet access TRS to register any details, this has been in force since 6 October 2020, so practitioners should be keeping a careful note of those trusts that will need to be registered when the system is up and running, which may well be not before July or August.
There are four forms of trust that will need to be registered:
1. Trusts arising on death from a Will, which continue more than 2 years from the death, and are not within the specific exclusions, this includes bereaved minors trusts and 18-25 trusts (within the terms for IHT purposes) and any trust arising under an intestacy is also excluded. The two year period will help many will trusts avoid the registration obligation but once over that period then bare trusts, IPDI trusts and relevant property trusts will need to register.
2. Joint ownership of property where the beneficial and legal owners are not the same, for example the legal title (registered at the Land Registry) is in two names, but there is a third beneficial owner who cannot be on the title as they are under 18, or working abroad. Or the title is in four names (the max number for the Land Registry) but there is a fifth owner whose name is not on the legal title. This is a very narrow exclusion that will affect many co-ownerships of property that are not generally thought of as trusts.
As this will apply to any trust in existence, there will be many trusts of property going back over the years that are also within this obligation to register. This will include any trust which gives someone a life interest or right to occupy a residential property.
3. Life policies written if trust if the policy has any form of surrender value, as the exclusion is drafted so narrowly. This is again not only new trusts but any set up in the past that are still in existence now. While looking back may be difficult, practitioners – financial planners, accountants, tax advisers and lawyers - should at least be ensuring that clients are aware of their obligations with any trusts set up from October 6 2020, and can be recorded when TRS allows.
It may be difficult to persuade clients to spend money on professional help to do this, but they should know of their legal obligations under Anti-money laundering regulations.
4. Pilot trusts for pensions death benefits written in trust must be registered unless set up before 6 October 2020, with the value not exceeding £100. Once any greater value is in the trust it is not excluded and all new pilot trusts from 6 October must register in any event.
A monthly briefing from Irwin Mitchell
March 2021
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