Money laundering and the Trust Registration Service

For some time, governments globally have been introducing legislation to fight against money laundering and terrorist financing. Concerns about trusts being used for illegal purposes led to HM Revenue & Customs creating its Trust Registration Service.

Trusts paying tax in the UK have had to register with the Trust Registration Service, since it went live in 2017. However, the European Union’s Fifth Money Laundering Directive (5MLD) extended the scope of trusts needing to register, and the filing deadline for this is now only a few months away.

What changes did 5MLD introduce?

5MLD took effect from 6 October 2020. It requires the following trusts to register with the Trust Registration Service, irrespective of whether they are liable for UK tax:

• all UK resident express trusts, unless specifically excluded
• non-EU resident express trusts which acquire land or property in the UK or which have at least one UK-resident trustee and enter into a business relationship in the UK

An ‘express trust’ is one which has been deliberately created and not imposed by court order or created by statute.

There’s no lower threshold and only a limited range of specific exclusions.

Trusts must be registered by 1 September 2022, unless created less than 90 days prior to 1 September 2022, in which case they must be registered within 90 days of creation.

The data collected on the Register includes information regarding each settlor, trustee, protector and named beneficiary, as well as details of the trust itself. Furthermore, even though a trust may not be liable currently for UK tax, any updates to the Register entries, for example, a change of trustee or a new named beneficiary added to the trust, must be made within 90 days of the change.

The Directive also requires the UK government to share data from the Register with law enforcement agencies under certain circumstances.

Don’t be caught out…

Trustees may be subject to financial and criminal penalties for non-compliance.

Because a trust doesn’t need to have been actively receiving income, distributing funds, or filing an annual tax return in order for it to require registration, we recommend that you seek advice as soon as possible to make sure your obligations as a trustee are met. Even bare trusts, where the beneficiary has the absolute right to the income, capital and assets, need to be registered unless they fall under one of the specific exemptions.

Need help?

If you’re a trustee and would like further guidance or help regarding your trust’s registration, or want to know whether any of the exclusions apply to your trust, please get in touch with Alison Day or Cindy Chaplin. You can find contact details in the Our People section of our website. Alternatively, you can call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Alison Day