The UK Trust Registration Service (TRS), first introduced in 2017 to enact the EU Fourth Money Laundering Directive, currently requires all trusts with UK tax liabilities to register with the TRS and populate it with certain information on their settlors, beneficiaries, power holders and assets. The Fifth Money Laundering Directive has now been implemented by the UK, significantly expanding the scope of the TRS. One major change is that the register is now accessible by anybody with a “legitimate interest”, no longer just by law enforcement agencies. Legitimate interest covers a range of situations around criminal investigations or proceedings, in particular money laundering or terrorist financing.
In addition, under the new rules, all UK trusts will be required to register (unless an exemption applies), whether or not they have UK tax liabilities. We summarised the changes being made in our earlier articles, Major changes to the UK Trust Register – impact for trustees and UK Trust Register – final rules published.
Those trusts being brought into the scope of the TRS rules were originally given a deadline of March 2022 to register. However, HMRC’s existing online system requires an upgrade to cope with the volume of trusts expected to register under the new rules. HMRC had hoped to complete the IT updates by spring 2021, thereby allowing a year for registration to take place. However, it was acknowledged last week that this target would not be met, with HMRC announcing that the IT update would only be ready by summer 2021 and so the deadline will be extended to allow trustees and agents of existing trusts approximately 12 months to register.
This extension is welcome news for the millions of trusts which will be required to register under the new rules, particularly given that some uncertainties still remain. For example, life policy trusts which only pay out on death, illness or disability are excluded from the new rules; however, it is not yet clear whether HMRC will expect life insurance trusts to register where the policy in question can be surrendered at any time (even if this is extremely unlikely in practice). HMRC’s initial view is that trusts holding policies with a surrender value will need to register, but discussions between professional bodies and HMRC are ongoing given the number of such policies which will, in reality, only pay out on death. We hope that these, and other, uncertainties will be resolved in HMRC’s detailed guidance which is yet to be published.