You may remember the scandal that emerged after the Russian invasion of Ukraine, in which Russian oligarchs were found to be holding substantial assets on British soil and the issue of money laundering by international criminals. In lieu of these revelations, the UK Government fast-tracked legislation to tackle these issues and improve corporate transparency.
Though the focus of this issue was addressing Russian oligarchs, it could affect anyone who is currently holding assets in a trust. In a nutshell, you don’t need to be a Russian oligarch to be affected by this legislation, and should review your situation to ensure you are adhering to the new legal requirements, including making disclosures to the government’s Trust Registration Service (TRS).
The Trust Recognition Service was created in 2017 as part of the UK Government’s implementation of the Fourth Money Laundering Directive, which aimed to improve transparency around trusts that are liable to UK tax and the ownership of particular assets.
Further money laundering regulations were then implemented in October 2020 with the Fifth Money Laundering Directive that further extended the scope of the TRS. This covered all UK express trusts and some particular non-UK trusts whether they were liable for tax or not.
The original registration date for trusts that fall under the new regulations was March 10, 2022; but this deadline was extended to September 1, 2022 due to a delay in the completion of HMRC’S TRS register.
The new deadline requires all trusts to register in the next 90 days and this can be done through the government’s online service. You can also use this platform to provide proof of registration, update details of a trust, declare no changes, authorise agents and close a trust on the trust register.
If it is the first instance that the service has been activated, or if a trust was registered before May 4, 2021, you will need to disclose whether the trust is an express trust and you will also have to declare if the trust is liable to pay tax in the UK.
If you are making changes to the trust details, you need to confirm if a non-UK trust has a business relationship in the UK, has purchased any land or property in the UK, and if it has a controlling interest in a non-EEA company.
The above information is also part of the registration process for all trusts registered after the above date. A full list of the details which are required can be found here.
Which UK trusts need to use the TRS?
Trusts that are known as ‘express trusts’ will need to register with the TRS. ‘Express trusts’ are those that have been deliberately created by a settlor for the express reason of transferring property to a trustee for a valid purpose, as opposed to a statutory, constructive or resulting trust.
Any express trust will need to register with the TRS in the instance that the trustees have incurred a liability in a given tax year. In other words, if a trust has had to pay Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, or the Land Transaction Tax if you are in Wales, you will have to register.
Which UK trusts do not need to use the TRS?
If a trust does not need to file a tax return or has not incurred a UK tax liability, it does not need to register. Registration is also not required if a settlor or beneficiary has incurred tax liability, but the trustees are not liable.
Further exemptions include the trustees of a charitable trust, until they incur a UK tax liability, statutory trusts, and trusts that have no other UK tax liability – other than a tax liability of less than £100 on bank or building society interest income.
It is best practice that if you are not experienced at dealing with such issues, you should speak to an accountant or legal professional to make sure that you are correct about whether you need to register a trust or not.
At Lee Coombes Accountancy, we are on hand to answer queries surrounding the often-complicated issues surrounding trusts and will help clarify the situation for you. Contact us on 01792 346272 or email email@example.com with your questions.