The trust registration service (TRS) is an online platform used by trustees to register the beneficial ownership of trusts and was initially introduced in 2017 in line with the Fourth Money Laundering Directive (4MLD).
In a bid to mitigate the increasing risks of money laundering and terrorist financing, in September 2021, HMRC adopted the new Fifth Money Laundering Directive (5MLD). The broadened scope of the regulations aim to increase transparency of company and trust ownership by requiring both taxable and non-taxable trusts to be registered. Importantly, only limited exceptions apply and essentially only trusts which are considered to be ‘low risk’ are exempt from such registration. For example, trusts for bereaved minors, trusts holding life insurance policies, or Will Trusts wound up within two years of death are exempt.
Within the context of Property trusts, where the legal and beneficial owners are not the same persons, the trust is registrable. However, several limited exemptions apply:
Property held on behalf of minor children
Where property is owned by two or more individuals and one of them is under the age of eighteen, the property is deemed to be held on trust for the benefit of the minor child. Accordingly, the trust would not be subject to registration until that minor beneficiary becomes of age.
Property owned by more than four people
Under UK law, there cannot be more than four individuals registered against the legal title of a property. In instances where there are more than four legal owners, this creates a trust which is imposed by law and therefore is exempt from registration for the purposes of the TRS.
Severance of joint tenancies
Properties held as tenants in common are not subject to registration so long as the beneficial and legal owners of the property are the same persons. The percentage share of each respective individual is of no relevance to the trust’s registrability.
Property held on behalf of partnerships
By law, partnerships do not have legal personalities and accordingly, property held by partners are deemed to belong to the partnership as a whole. Despite the different legal and beneficial owners, this does not give rise to registration on the TRS unless specifically stated within a deed that the property is being held on trust for the partnership.
Registering your trust
The increased scope of the 5MLD means that all qualifying trusts must have been registered on or by 1st September 2022. However, the revenue have advised that trustees will not be penalised for failure to register by this deadline if all reasonable steps are taken to act in line with the guidance and register the trust, if required, as soon as possible.
The registration process requires trustees to provide information about the trust itself and the assets held within it, as well as details of the trustees, settlors and beneficiaries. Any changes to these details must be updated within 90 days of that change.
For further guidance on the TRS and trust law in general please contact John Goodchild, Partner in the Private Wealth team.
This article is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this article may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.