Extension of the UK Trust Register
12 / 08 / 2020
Since 2017, trusts that incur a UK tax liability have been required to register on a central register of trusts (“the Trust Register“) managed by HM Revenue and Customs (“HMRC“). The Trust Register is not accessible to the public but only to law enforcement agencies if required. However, under new rules, the Trust Register is to be extended so that a greater category of trusts are required to register, and the Register will be accessible to those who can prove a “legitimate interest” in seeing the information.
The changes to the Trust Register rules derive from EU legislation, the Fifth Anti-Money Laundering Directive (“the Directive“), and are designed to counteract the risk of trusts being used for money laundering and terrorist financing.
The UK has implemented the Directive and the majority of its provisions came into force on 10 January 2020. However, the provisions relating to the Trust Register were delayed to allow the government to consult on how to best implement the rules in the UK given the prevalence of trusts in estate planning and the risks and practical problems posed with the Directive’s requirements.
The government published its response to the latest consultation on 15 July 2020 and we now have greater clarity on the type of trusts that will now have register and who can access the information that is registered.
Trusts exempt from registration
The Directive requires all “express trusts” to be registered. However, the government has agreed that certain categories of express trust can be exempted. These include:
- trusts created by Will that are wound up within two years of death and only receive assets from the estate;
- trusts that only receive death benefits from a life insurance policy and are wound up within two years of death;
- existing trusts holding assets valued at less than £100 unless or until further assets are added (often known as “pilot trusts”);
- trusts for vulnerable beneficiaries or bereaved minors;
- trusts created automatically by law where an asset is co-owned (such as land), where the trustees and beneficiaries are the same persons;
- UK registered pension trusts;
- charitable trusts regulated in the UK; and
- pure protection life insurance policies and those paying out on critical illness or disablement, including group policies.
This list of exempted trusts is wider than was originally thought and is to be welcomed.
The general rule is that non-UK trusts will not be required to register. However, the government will require such trusts to register if they enter a business relationship with certain UK organisations (such as a law firm) and the trust has at least one UK resident trustee. Irrespective of this, any non-UK trust that acquires land or property in the UK will be required to register. Trusts that are already registered in another EU Member State will be automatically exempt from UK registration.
Deadlines for registration and data retention
The deadline for registration is 10 March 2022 for existing trusts that are newly within the scope of the rules once the legislation is passed. Trusts created after 10 March 2022 will have to register within 30 days of the trust being created, unless an exemption applies.
Access to the register
The government’s response makes clear that the requirement for those with a “legitimate interest” to access the Trust Register will not be changed. However, the government has given assurance that each request to access the register will be reviewed on its own merits and access given only where there is evidence that it furthers work to counter money laundering or terrorist financing activity and there are the necessary safeguards in place to reduce the risk of information being released where it could lead to disproportionate harm. Beneficiary information will not be disclosed if it would lead to a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or where the beneficial owner is a minor or otherwise legally incapable. Further information and guidance on how this process will operate in practice will be provided in due course and we will be reviewing this.
Next steps for trustees
Trustees of affected trusts need not take any action as yet, as the legislation is still in draft form and subject to change. Guidance is also expected from HMRC. We will be monitoring developments in this area closely and will be updating affected clients in due course.
If you would like to discuss these development in further detail, please contact our senior trust manager Michelle Jones, or your usual Wedlake Bell adviser.