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In our last article on this topic, we considered the purpose of the Trust Registration Service (TRS), its intended implementation and risk issues for professionals.
Since January 2020, the proposed implementation dates have been delayed, but there is now a new, hard deadline of 1 September 2022 for registration of certain classes of trust.
This article provides a brief summary of the Trust Registration Service's obligations, the relevant time periods and recaps on potential risk issues for private client professionals across multiple disciplines, including solicitors, accountants and tax professionals.
What is the Trust Registration Service?
The TRS came into existence in 2017 through the implementation of a money laundering EU directive. Its purpose, as stated in the TRS Manual, is to provide “a register of the beneficial ownership of trusts”. From 2017, trustees were required to register trusts which paid certain UK taxes and that information was made available to HMRC, law enforcement agencies but not third parties.
New rules were introduced on 6 October 2020 which broadened the scope of registrable trust to include some non-UK and UK trusts even if they were not tax paying. Core information about the trust itself, the trustees and, importantly, beneficiaries is recorded.
Registrable Trusts – more detail
The TRS Manual provides very full guidance on the types of trust which require registration. These include:
- Bare trusts, commonly known as nominee arrangements.
- Discretionary trusts.
- Employee benefit trusts.
- Interest in possession trusts (in certain circumstances).
- Non-UK trusts, unless UK land is owned or a relationship exists with a UK business.
- Protective trusts.
Importantly, other types of trust may become registrable in the event that UK tax is payable.
Practitioners should ensure they are fully informed of the guidance contained in the TRS Manual which is an easily navigable document with hyperlinks to other relevant sources and guidance.
Deadline dates and information
If the trust was in existence as at 6 October 2020, the hard deadline for registration is 1 September 2022. For non-taxable trusts which came into existence after 6 October 2020, the deadline is 1 September 2022 or 90 days from creation, whichever is later.
For taxable trusts, there are various time limits depending upon the date of creation – further information can be found here.
The same guidance provides details of all required information for registration. For recently created trusts, the information required to provide should be relatively straightforward – such as the identities and addresses of the trustees, date of creation of the trust and information concerning the beneficiaries. But, for older trusts, or for trusts with a wider class of beneficiary, certain information might be more difficult to obtain, such as the date of birth, country of residence, nationality, mental capacity at date of trust creation and national insurance numbers of the beneficiaries.
Professionals – risk issues
Many private client professionals act as trustees as part of their usual business activity. If adequate plans have not been put in place to harvest the information required by the TRS, practitioners will face a heavy burden over the next few months in obtaining relevant information, completing the relevant registration forms and dealing with any queries from beneficiaries (who may express reluctance in providing details or “consenting” to its use unless proper explanation has been given of the legal requirement to do so).
Any delay in registration will likely result in a fixed fine of £100. HMRC retains greater fining powers for repeat or more egregious offences. However, cover for fines is routinely excluded under standard professional indemnity policies.
Delay in registration can have more serious concerns. Third party agents (such as solicitors, financial professionals or property professionals) will require formal confirmation of registration before they are able to accept instructions to act for a trust. One can easily envisage circumstances where a failure by a trustee to register with the TRS means that the opportunity for a property sale (in a falling market) is lost, causing the trust financial damage. Or, similarly, that the instruction of a stock broker is delayed (in a rising market) such that the base cost of the shares at the date of eventual purchase is higher than it would have been. This sort of trustee liability is routinely covered by professional indemnity policies.
Comment
Practitioners have received considerable warning of the implementation of the TRS but, understandably, events over the last couple of years may mean that trustees, and the professionals who advise them, may not have been as efficient as they might have been when harvesting relevant information. Whilst not unduly onerous in isolation, where practitioners are trustees to multiple trusts or have accepted instructions from trustees with such multiple responsibilities, the administrative burden of preparing applications should not be under-estimated.
Given the real risk of liability for trustees and professionals in the event of delays in registration, with six months to go, now is the time to implement plans to ensure timeous compliance.
Read other items in Professions and Financial Lines Brief - May 2022
Insurance and reinsurance
United Kingdom