UK Trust Register – easy as A, B, C …?
Following an extension of the UK Trust Register, many trusts (both UK and offshore) will either need to register for the first time or provide additional information to HMRC by 1 September.
As the deadline looms for the registration of three new categories of trust (so-called ‘Type A’, ‘Type B’ and ‘Type C’ trusts), trustees should review their position without delay. Trusts arise in a variety of everyday situations and it can be far from straight-forward to identify registrable trusts and negotiate the registration requirements.
Trusts that directly incur UK tax have been required to register via HMRC’s Trust Registration Service (TRS) since 2017. The relevant taxes are: income tax, capital gains tax, inheritance tax, stamp duty land tax (and Scottish and Welsh equivalents) and stamp duty reserve tax.
Trusts already registered need to supply additional information by 1 September, including the residence and nationality of all beneficial owners and the nature and extent of their interest.
In 2020, TRS expanded to non-taxable trusts. This extension catches trusts that arise in fairly ordinary situations that are not immediately obvious. Non-taxable trusts were therefore given a long lead-in time to prepare, but the 1 September deadline is now fast approaching. It applies to all UK trusts in existence on 6 October 2020, whenever created and even if they have since ended.
For example, a trust arises when assets are held for children who are under 18. There is an exclusion for cash held in a bank account for a minor, but not for other assets such as investments or property. Similarly, a trust arises when land is jointly owned or held (even in part) for anyone other than the registered owner. This brings land held for minors or other family members into the scope of the trust register in some cases.
Certain trusts are excluded, e.g. joint ownership trusts where the legal and beneficial owners are the same; charitable trusts; trusts holding pension or life policies; trusts lasting no longer than two years after a death; trusts arising under legislation or a court order; and trusts used incidentally in commercial situations. However, these exclusions cease to apply if a trust incurs a tax liability, and some exclusions are time limited and may cease to apply.
Non-taxable non-UK trusts that are not excluded need to register by 1 September (or within 90 days) if, on or after 6 October 2020, they:
- Directly acquire an interest in UK land.
- Enter into a business relationship with a relevant UK service provider (e.g. a solicitor, or other business required to conduct anti-money laundering checks), but in this case only if there is at least one UK-resident trustee.
It should be noted that a complete change of trustees post-6 October 2020 can amount to the acquisition of land or establishment of a new business relationship and so trigger a requirement for offshore trustees to register.
‘Bare’ trusts are not excluded and so if a nominee is used to hold assets such as UK land, the nominee will need to register with TRS. If land is held by a non-UK corporate nominee, it will also need to register on the Register of Overseas Entities (‘ROE’) at Companies House.
All trusts have to register online (or an agent such as a solicitor or accountant can do so on their behalf). They need to provide information about the trust and personal details about its ‘beneficial owners’. These include: the settlor, trustees and anyone else with control over a trust in addition to the beneficiaries – and anyone named as a potential beneficiary in a letter of wishes from the settlor.
It may be sufficient to describe a class of beneficiaries. The circumstances in which this is permissible are not entirely clear but it is thought that this should be the case where some of the individuals benefitting from the trust have not been determined. Where named beneficiaries will only benefit when a certain event happens, such as when another beneficiary dies, they can be included in a class description until the event occurs. However, if all members of a class can be individually identified, they should be recorded as individuals and not as part of a class, and individuals who have received a benefit from the trust should also be individually recorded even if they are not named in the trust instrument. This is another area of complexity with the register.
Taxable trusts must also provide information about the trust’s assets and give an approximate value. Where the trust has a controlling interest in a non-UK company resident in a jurisdiction which does not have any legal requirement to maintain a corporate beneficial ownership register, the trust must provide details of that ‘third country entity’. This requirement does not apply to non-UK trusts with no UK trustees.
Access to the register
Information on the register is generally only available to HMRC and law enforcement bodies. But from 1 September, some beneficial ownership information can be accessed by the public on request for certain trusts. Anyone can make a ‘Trust Data Request’ about trusts which have registered a controlling interest in a third-country entity. Requests can also be made to see information on some trusts (generally those which have a UK trustee) by those with a ‘legitimate interest’, i.e. anyone investigating a specific instance of suspected money laundering or terrorist financing. HMRC will not disclose information about minors or anyone who lacks mental capacity, or trustees have informed them that access could otherwise lead to harm.
Trustees must update the registered information within 90 days of becoming aware of any changes. Taxable trusts must also declare that TRS is up to date on an annual basis by 31 January.
In addition to the registration requirements, trustees must maintain their own up-to-date written records of all beneficial owners and potential beneficiaries of the trust. When trustees enter into a transaction or form a business relationship with a regulated third party in the UK, they must also state that they are acting as trustees and provide the third party with information identifying all the beneficial owners of the trust. If this information changes, trustees should inform the third party within 14 days. From 1 September, trustees can supply an excerpt from TRS to third parties for anti-money laundering checks and the third party must report any discrepancies to HMRC.
HMRC are expected to take a ‘light-touch’ approach, issuing ‘nudge letters’ before issuing penalties for failure to register or update. Fixed financial penalties will be issued for continued or deliberate non-compliance.
What should trustees do now?
Trusts which are already registered should ensure existing registrations are up to date and provide the further information where necessary. Other trustees should take immediate steps to identify whether the trust is registrable – including those that have been wound-up since 6 October 2020 and if so identify the beneficial owners, gather the information and register the trusts as soon as possible.
Boodle Hatfield would be happy to provide advice to trustees as to their requirements and to assist with the registration of the trust.