What is a Trust?

A trust is a way of managing assets, such as money or land, to protect and control family assets. It is also a way to manage the affairs of those who are incapacitated or are too young to manage their own or to pass on assets during a lifetime or when a person dies. There are many types of trust, such as Life Interest or Discretionary Trusts that deal with different assets in different ways. We would always recommend seeking legal advice when considering forming a trust to determine the best way to set this up to meet your intentions.

The Old Law

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 implemented the fourth Money Laundering Directive in the UK in order to prevent money laundering and terrorist financing. The Regulations therefore imposed new obligations on various things, including Trusts.

However, these obligations only bound trustees of ‘relevant trusts’. This meant that trustees were required to keep and provide information about the beneficial owners of trusts and HMRC were required to maintain a “Trusts Register” of ‘taxable relevant trusts’ and trustees of ‘taxable relevant trusts’ had to register information about beneficiaries.

A trust was considered a ‘taxable relevant trust’ where in any tax year it had liability to pay one or more of the specified taxes. However, this did not include many family trusts whereby they were holding a non-income producing asset, such as a property that was being lived in by a family member.

The New Law

Since the 2017 Regulations, the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 have come into force and have introduced further reporting requirements on trustees by expanding the scope of the Trusts Register. In particular, it extended reporting duties to trustees of all non-excluded UK express trusts. This is an enormous change to the scope of the register and provides that it will now stretch to cover a lot of previously excluded family trusts.

As a result, trustees are now expected to register a trust on the Trusts Register with details of:

• Trust name
• Date that the trust was created
• Individual residency of all trustees and if outside of the UK, the residency of the settlor
• Whether the trust acquired UK land or property since 6th October 2020
• Whether the trust is listed on a European Economic Area register
• If the trust has purely non-UK trustees or a mix of UK and non-UK trustees as well as a non-UK settlor, whether it has a business relationship in the UK

Furthermore, the trustees must list all beneficial owners and their details. Beneficial owners include  the settlor, the trustees, the beneficiaries, the class of beneficiaries where individuals have not been determined, and any individual who has control over the trust.

For all those listed above, the trustees must provide:

• Full names
• Dates of birth
• Country of residence
• Mental capacity
• Role of the trust
• Or if a lead trustee, they must give details of a National Insurance Number or proof of Identification

Essentially what this means is that nearly all Trusts, however created and whatever they contain, must now be registered with the above details.

Please contact us should you have any concerns or queries when considering whether a trust you are involved with needs to be registered.

Important Dates!

Taxable Trusts have a deadline of 31st January following the tax year in which liability arose to be registered. Such trusts are also required to update the information on the register within 90 days of any changes to beneficial ownership or trust details.

However, where a non-taxable trust was in existence on or after 6th October 2020, it must be registered by 1st September 2022. Those trusts created after 1st September 2022 must be registered within 90 days of their creation. Again, if this trust becomes taxable at any point it must be registered by 31st January in the tax year following liability arising.

Further, if a trust was in existence on or before 6th October 2020 but ceased to exist before 1st September 2022 (the deadline), it MUST still be registered and then closed down. However, HMRC have agreed to take a ‘proportionate approach’ to such trusts which they receive notification of following the deadline.

If you require any assistance with the above information, or in registering a trust for which you now have an obligation, please do not hesitate to contact us on our freephone 0800 8 60 62 65.

Sophie Aldridge – Paralegal