As from 2017, HM Revenue and Customs (“HMRC”) have maintained a centralised database of UK trusts known as the Trust Register. Up until now, the requirement to register has been limited; however, the rules are changing and the vast majority of UK trusts will need to be registered from 2022.
The Trust Register stems from EU legislation requiring member states to help in combatting money laundering and terrorist financing by making trusts more transparent to legal authorities. As a result, if a trust incurs a charge to UK tax, it is generally required to submit data on its beneficial owners (such as the beneficiaries of the trust, the trustees and settlors) to HMRC for the Trust Register. To date, the Trust Register has not been publicly available and can only be accessed by HMRC and law enforcement authorities; however, these access rules are also changing.
What is changing
In 2018, the EU passed new anti-money laundering legislation requiring member states to expand their Trust Register requirements to make a broad category of trusts registrable, and to allow a limited form of public access to the register. The UK legislation is not yet in force but the Government has resolved to implement these requirements despite Brexit.
All UK trusts will need to be registered unless they all under one of the excluded categories. Key exemptions include property which is co-owned (where, by law, a trust arises automatically) where the legal and beneficial owners are the same; trusts holding life insurance policies; most registered pension schemes held in trust; and most charitable trusts. However, if an exempted trust generates UK tax, it will need to be registered.
Existing trusts that are within the scope of the amended Trust Register rules must be registered by 10 March 2022. If an existing trust incurs UK tax before then, an earlier deadline may apply.
Under the new legislation, once enacted, access to the Trust Register will be given to persons who have a “legitimate interest”. This is a cause of concern but HMRC has indicated that those seeking access will need to be involved in an investigation into money laundering or terrorist financing or have a reasonable suspicion that the trust is being so used.
As a result of these new rules, there will be a large number of trusts in the UK that will need to be registered. If you are a trustee or involved with a trust that is not yet on the Trust Register and would like any further information, we would be pleased to advise on whether your trust is affected.