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As most trust practitioners will be all too aware, the deadline for registration of all existing non-taxable trusts under HM Revenue & Custom’s Trust Registration Service (‘TRS’) is 1 September 2022. Any trusts created after 3 June 2022 must register within 90 days of creation. The requirement to register taxable trusts was introduced in 2017 under the EU’s Fourth Anti-Money Laundering Directive and this expansion of the registration requirements is pursuant to the Fifth Anti-Money Laundering Directive.
The new rules relate to all trusts in existence on or after 6 October 2020 even if they have since been wound up. The trust registration requirements extend to all ‘express’, that is, written trusts including those created by will. In particular this includes bare trusts (unusually, as these are not ‘settlements’ for tax purposes), save in certain circumstances.
There are limited exemptions to registration including the following:
It is important to note that these exemptions do not apply where the trust itself has a requirement to submit an annual return or has a liability to tax in any given tax year. In such circumstances, the trust will need to be registered by 31 January in the tax year following the one in which the liability arose.
The penalty regime was only recently published by HMRC and provides for a maximum penalty for failure to register (or for failure to update the register within 90 days where a reportable change occurs) to a fine not exceeding £5,000.00. However, HMRC have also indicated that at this stage they will not be imposing penalties for first offences given that the regime is new and presumably since there will be a vast number of trusts already in existence where the trustees will not have become aware of the change in the rules. How the penalty regime will be applied in future will be of interest as there may be many trusts which do not come to light for many more years. HMRC has also said that a stricter approach will be taken in issues of ‘deliberate’ non-compliance.
It should be borne in mind that the TRS is not a universal registration system and trusts may still have additional reporting obligations under FATCA and the Common Reporting Standard. It has also become apparent that where a trust has assets or a ‘business relationship’ with an investment provider in an EU jurisdiction there may be a further requirement to register on the equivalent registration service in that EU country.
One particular problem which has come to light recently is in relation to offshore investment bonds which are held through companies registered in Dublin. In those cases, advice will need to be sought on the registration requirements in the Republic of Ireland.
There is no doubt that the new rules are a complex addition to the world of trusts and there are likely to be many cases where trustees are unaware of their obligations or will be unsure as to whether or not the particular trust in question has a requirement to register.
The specialist Private Client Team at Cleaver Fulton Rankin can advise on these issues and, even if the 1 September deadline has already passed, it is important to get advice as soon as practicable.
This article has been produced for general information purposes and further advice should be sought from a professional advisor.