The Money Laundering and Terrorist Financing Regulations 2017 and the amendment in 2022 require certain Trusts (see below) to be registered by 1.9.22 and newly created Trusts to be registered in accordance with the new rules.
It is worthy of note that the Trust Register has been in place since 2017 but it is now being updated.
What do I need to do?
Law firms need to think now about the implications of the Trust Registration scheme and adapt their systems. Some suggestions: –
- Registration – Put in place a process for the registration of Trusts. All UK and some non-UK trusts that are currently open, will need to be registered, whether or not the trust has to pay any tax, but with some specific exclusions (see below)
- Questionnaire – Create a Trust questionnaire which means you can capture the information needed to register a Trust – for ease of reference, we have provided this information under section 3.4 below. Send the questionnaire to Trusts you have advised on and have been registered and Trusts you registered on behalf of a client (more information will now be needed) and send the questionnaire to any new Trusts that you create. It will be wise to have one questionnaire for an individual and one for a Company.
- Trust Register – Create a Trust Register which identifies: –
- The name(s) of the Trustees
- The Date of the Trust
- The type of Trust
- The date the Trust needs to be registered
- The date of Registration
- Whether a completed Trust Questionnaire (see above) has been received
- Review – Review your portfolio to identify Trusts the firm has created and establish if it needs to be registered by the firm or the Trustee if not the firm. Place them into your register. Ensure you are clear on which Trusts needs to be registered and which do not.
- Contact – Contact Trustees to notify them of their obligation and inform them of the penalties for failure to meet them. You can offer to assist, by registering the Trust, if they are not sure what to do. This would be a chargeable service.
- Training – Provide Training to your Private Client Team on the new regulations:-
- the types of trust to be registered
- the required information
- how to register them
- when they need to be registered.
- Service and Fees – Review your services and fees to confirm the fees you will charge for registering a Trust (whether you are the Trustee or not)
- Website – Update your website with any changes to your services.
- Future Advice – Your firm will need to take a stance if instructed to assist in a Trust matter which has not been properly registered. You will likely need to refuse to act until the registration has been properly registered (as the Trust will breach requirement of the AML Regulations). This is ultimately a training issue and ensuring you raise the appropriate enquiries with any new client.
- Guidance Notes– in any standard information you send to clients, at the client care stage, who have instructed the firm to create a Trust or a Trust will be created as part of the advice provided, ensure there is an appropriate statement setting out the requirement for Trusts to be registered. This will ensure all clients are clear of the need to register the Trust whether the firm is instructed to do so or not. You can also make it clear that the firm can register the Trust for an additional fee even where the firm or a member of the firm is not a Trustee. A link to the appropriate Gov.UK website will assist – the link is provided below.
- Check your SRA AML approvals – It is also wise to check that you have notified the SRA that your firm handles Trust work and Tax Advisor where you need to update your information you will need to file an FA10b which is how you update your profile with the SRA and advise them of the services your undertake which are regulated under the AML regulations. If you cannot find your last files FA10b the SRA will be able to advise you of the services you are regulated for.
Who is responsible for registering a Trust?
The person responsible for registering the Trust is the Trustee, if there are multiple Trustees it will be the decision-maker.
Law firms should be aware that if they are not the Trustee, they need to ensure the Trust is registered (to comply with the AML regulations). Whether they do this themselves, or ensure the Trustee does. Where the firm, or an individual within the firm, is the Trustee, the firm should assume responsibility for direct registration.
Why do I need to take this action?
As noted above, the registration of Trusts is a requirement of the AML Regulation 2017 amended in 2022.
Failure to do so will create a fine of £100 and could leave your firm in breach of the AML regulations.
What Trust do I need to register or ensure are registered?
A Trustee must register the following Trusts
- Trusts that become liable for any of the following taxes:
- Capital Gains Tax
- Income Tax
- Inheritance Tax
- Stamp Duty Land Tax
- Stamp Duty Reserve Tax
- Land and Buildings Transaction Tax (in Scotland)
- Land Transaction Tax (in Wales)
- All UK express trusts even if they have no tax liability — unless they are specifically excluded (see 9 below, which we have taken from UK Gov website for ease of reference)
- All non-UK express trusts, such as trusts that:
- acquire land or property in the UK
- have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK
- If the trust is not resident in the UK (‘non-resident trusts’), you must register the trust if it becomes liable for tax on income coming from the UK or on UK assets.
- If the trust has a tax liability but a relief covers this, it will be necessary to register the trust to claim the relief through Self-Assessment.
How do I register a Trust?
Trusts can be registered via the Government Gateway; The Trustee or Firm will need to create or access the appropriate Government Gateway using the: –
When do I need to register a Trust?
The date of registration depends on 3 factors: –
- when the trust was created
- the tax the trust is liable for
- if it has been liable for Income Tax or Capital Gains Tax before
7.1 For A Non Taxable Trust they must be registered by 1.9.22: –
- If the trust was in existence on 6.10.20
- If the Trust is created after 6.10.22 it must be registered within 90 days of the Trust being created or by 1.9.22 whichever is the later.
7.2 For A Taxable Trust: –
- If the Trust is created on or after 6.4.21 it must be registered within 90 days of the Trust being created or by 1.9.22 whichever is the later.
- For any existing Trust created before 6.4.21 the Trust must be registered by 5th October in the tax year after the Trust starts to receive income tax or has a capital gain tax liability.
- If the Trust has previously been liable for Income tax or Capital Gains Tax the Trust must be registered by 31st January, in the tax year after the one in which the Trust received any income or capital gain that is taxable.
- If the Trust is liable for other types of tax they must be registered by 31st January in the year after the Trust becomes liable for tax.
What is needed to register a Trust?
The following information is needed to register a Trust (taken from the Gov.UK website for ease of reference) – https://www.gov.uk/guidance/register-a-trust-as-a-trustee#what-youll-need – : –
- The name of the trust
- The date the trust was created
- To say if the trust is an express trust or not
- Details about whether a non-UK trust has a business relationship in the UK
- Details about any UK land or property the trust has purchased
You will also need, for the Lead Trustee:
- Date of birth
- National Insurance number and address (if they’re a UK citizen)
- Passport details and address (if they’re not a UK citizen)
- Telephone number
- Country of residence
- Country of nationality
If the lead trustee is an organisation, you’ll need to give their:
- Organisation name
- Organisation UTR
- Telephone number
- Email address
- Country of residence
You will also need to provide
- Details of all beneficiaries
- Details of all individuals, trusts, charities and organisations named as beneficiaries in the deed
- The class of beneficiary
- The employment status of the beneficiaries
- Any Trust that has a controlling interest in the EU
- The type of Trust
- Details of how it was created
- The Trusts UTR (Unique Tax Payer Reference)
- Details of Deceased Settlors
- NI Number
- Where there are shares held:
- Share company name
- Number of Shares
- Class of Shares
- Value of Shares
- Where there is a Partnership
- Start date
- Where there is a Business
- Business Name
- Value of the business
- Where there is property and land
- Address and description
- The estimated value at the time of entering the Trust
- The estimated value of the proportion held if the Trust does not own all of it
- Where there are other assets
What types of Trust do not need to be registered?
The following types of Trust do not need to be registered: –
- Trusts used to hold money or assets of a UK-registered pension scheme, such as an occupational pension scheme
- Trusts used to hold life or retirement policies providing that the policy only pays out on death, terminal or critical illness or permanent disablement, or to meet the healthcare costs of the person assured
- Trusts holding insurance policy benefits received after the death of the person assured, providing the benefits are paid out from the trust within 2 years of the death
- Charitable trusts which are registered as a charity in the UK or which are not required to register as a charity
- ‘Pilot’ trusts which were set up before 6 October 2020 and which hold no more than £100 – pilot trusts set up after 6 October 2020 will need to register
- Co-ownership trusts set up to hold shares of property or other assets which 2 or more people jointly own for themselves as ‘tenants in common’
- Will trusts which are created by a person’s will and come into effect on their death providing they only hold the estate assets for up to 2 years after the person’s death
- Trusts for bereaved children under 18 or adults aged 18 to 25 set up under the will (or intestacy) of a deceased parent or the Criminal Injuries Compensation Scheme
- ‘Financial’ or ‘commercial’ trusts created in the course of professional services or business transactions for holding client money or other assets.
At The Strategic Partner, we provide law firms with a range of services to assist in the management of their business. Maintaining a Trust Register is part of our Risk, Compliance and AML Service – https://www.thestrategicpartner.co.uk/law-firm-support/regulation-and-compliance-including-aml/.
For more information about The Strategic Partner or any of our services, you can call us on 02039119710, you can email us firstname.lastname@example.org or you can visit our website to make an online enquiry https://www.thestrategicpartner.co.uk/contact-us/.