The whole issue of the Trust Registration Service (“TRS”) originates in various EU requirements, and most recently the Fifth European Directive (5MLD) which the UK signed up to notwithstanding our departure from the EU in January 2020. The explanatory recitals to 5MLD provided the explanation at para 28 that national governments should be required to determine the level of transparency with regard to trusts and other similar legal arrangements in the light of the risks presented by them of money laundering and terrorist financing. The aim has been to ensure that those with a legitimate interest should have the wherewithal to be able to access information as to the beneficial ownership of trusts and other such legal devices, consistent with the right to privacy and the protection of the personal data of those concerned.
The applicable legislation will be found at r.42 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLR 2017”, as amended) under part 5 – “Beneficial Ownership Information”. The trustees’ obligations will then be found at r.44, which requires the trustees of relevant trusts to maintain accurate and up to date records of the potential and current beneficiaries, and the actual registration requirements are then dealt with at the amended r.45ZA. This amended provision describes the registration obligations as applying to three different forms of trust – “A”, “B” and “C”.
As to the Trust Registration Service, this was originally constituted and came into effect in June 2017 as a result of the Fourth Money Laundering Directive, then requiring express trusts with UK tax liabilities to become registered, and then to be updated annually. The registration requirements were then extended as a consequence of 5MLD in October 2020 to include all express trusts that are not taxable other than those that are subject to specific exclusions, and certain non-UK express trusts holding land or property within the UK also. This latter extension was seen to be necessary as a result of the extensive concerns that have been widely expressed in recent years as to the problem of UK property – and high value London properties in particular – being regarded as a safe investment for overseas individuals who often have questionable assets at their disposal.
There remain many uncertainties within this complex area of legal requirements and more explanation of the precise obligations that will arise has been promised by HMRC. The online registration facility for registering a new trust now caught by these provisions opened on the 1st September 2021, but there has now been a delay to the originally planned date of the 10th March 2022 for the compulsory registration of non-taxable trusts to the 1st September this year instead.
The other major change has been that whereas the original requirements imposed a 30 days registration period this has now been extended to 90 days instead in response to the widespread concerns expressed by many of the professional bodies most exposed, and many of their members also. The practical effect of this change will be to require all registrable trusts created after the 2nd June this year to become registered by the revised 1st September date. The UK government has chosen to go further with these new requirements than strictly required by 5MLD, most notably by extending the obligations to non-UK trustees holding UK land acquired after the 6th October 2020.
Perhaps of more general concern to most law firms the regulations may impact upon probate practitioners as well in that the personal representatives may have to register the estate in accordance with these provisions in some circumstances. For an explanation of what may be required here see on the Government website TRSM27020, and the guidance on when an estate will be regarded as being “complex”, so as then to become subject to these additional requirements. Whether this will be the case depends upon the total value of the estate, as stated primarily to be where it was valued at more than £2.5m at the date of death, along with certain other indicators relating to the income and capital gains tax due for the administration period and the value of the estate’s assets to be sold as part of the process.
Further guidance on these complex new requirements has been promised by HMRC and we will report further to our members as and when this is published.