Changes to the Trust Registration Service in 2020

Changes to the Trust Registration Service in 2020

In 2017, the Trust Registration Service (‘TRS’) was introduced by HMRC following the adoption of the 4^th Anti Money Laundering Directive by the UK Government. The TRS currently applies to relevant taxable trusts. The information held on the register is confidential, although access is permitted to law enforcement and intelligence agencies.

The 5^th Anti Money Laundering Directive (‘5MLD’) which will come into force by 10 January 2020 will remove the tax liability test which will significantly increase the number of trusts required to register and remove the data access restrictions that are currently in place.

The Proposals

When 5MLD enters into force in January 2020 all UK resident trusts will be required to register, in addition all non-EU resident trusts that acquire an interest in UK land and/or property on or after 10 March 2020 and non-EU resident trusts that enters a business relationship with an entity that is subject to UK compliance obligations under 4MLD or 5MLD on or after 10 March 2020 will be obliged to register on the TRS.

Under 5MLD, potentially all UK resident trusts and offshore trusts holding UK assets will be subject to TRS registration requirements whether they have a tax liability or not. The requirements of 5MLD will lead to complex issues for lay trustees and advisors who will need to identify where trusts exist and whether they are obliged to register.

Trusts are used extensively in the UK and exist in many forms including life insurance policies, pension funds, charities and even bare trusts which are often used by parents or guardians holding assets on behalf of minor children.  The Government has opened a Consultation on 5MLD which will address these issues and the outcome is expected to bring clarity to the scope of 5MLD and confirm which trusts will be exempt from TRS registration.

Information Access

HMRC will be permitted to disclose data held on the TRS with anyone with a ‘legitimate interest’ in accessing the information. This will include entities that are required to carry out identity checks when entering new business relationships and anyone who requires information regarding the ultimate beneficial ownership of non-EU trusts.

The Government has indicated that data access requests based on a legitimate interest will be restricted to instances where information is required for counter terrorism and anti-money laundering purposes.

Timelines

Unregistered trusts that are in existence on or before 10 March 2020 will have until 31 March 2021 to be registered on the TRS.

Trusts that are established on or after 1 April 2020 must register on TRS within 30 days of creation.

The outcome of the consultation will bring a welcome clarity to the scope of 5MLD and the new TRS registration requirements.