Trust who you tellJul 13th, 2021
Under the scope of the Trust Registration Service (“TRS”) a far greater number of trusts, that were not previously required to do so, must now register in 2022.
So how does this impact on personal injury claimants?
By way of background, the TRS removed the ability for trustees to register and notify HMRC of changes to trusts via a paper submission, bringing the service into the digital age with an online service that trustees are required to utilise. So far, only trusts with UK tax liabilities needed to be registered via this service.
So what has changed?
Under The Fifth Money Laundering Directive (“5AMLD”) implemented in the UK, subject to any specified exclusions, the scope of the TRS has been extended significantly. Consequently, unless excluded, all of the following trusts must register whether or not a UK tax liability arises:
- Existing UK express trusts;
- Non-UK express trusts where one or more of the trustees is UK resident and that hold an interest in UK land or enter into a business relationship with a relevant person (e.g. accountant of lawyer) in the UK; and
- Non-UK express trusts where none of the trustees are UK resident and the trust acquires an interest in UK land.
When does this have to be done by?
Initially 10th March 2022 was set as the deadline to register such trusts on the TRS.
Delays to the upgrading of the existing TRS system to be able to cope with the increase in registrations has led to updated guidance that the deadline will be extended to 12 months after the upgraded goes live.
Once live, any new UK Express trusts will need to be registered within 30 days of creation. Will trusts do not, however, need to be registered within 30 days of the date of death. ‘Will Trusts’ are not required to register if solely receiving assets from the deceased’s estate providing they are wound up within two years of death and as such the deadline for registration is extended to two years after the date of death if the Will trust will be retained beyond that date.
Any changes that are notifiable on the TRS must also be notified within 30 days of the event. These include: a change of trustee (including the death of a trustee):
- A distribution to a “new” beneficiary (i.e. a beneficiary who is not already named on the TRS);
- The death of a beneficiary named on the TRS; or
- The winding up of the trust.
Which trusts are exempt from these requirements?
The most relevant trust applying to our clients is a Personal Injury Trust (PITs) and there will, without doubt, be much relief that PITs are specifically excluded from needing to register and therefore fall outside of the scope of 5AMLD.
The following is a summary of some of the other key exemptions that may apply to personal injury claimants:
- Trusts imposed by statute where these do not result from the clear intention of the settlor, for example the statutory trust arising on intestacy;
- UK-registered pension trusts;
- Charitable trusts regulated in the UK;
- Pure protection life insurance policies and those paying out on critical illness or disablement, including group pensions;
- Trusts for vulnerable beneficiaries or bereaved minors; and
- Maintenance fund trusts.
The list is not meant to be exhaustive and, therefore, should you need to consider a trust not specifically set out above it is advisable to take individual expert advice.