In 2017 the UK implemented domestic legislation to comply with the fourth EU directive on anti-money laundering “AML4”. Under that legislation a requirement was put on trustees of taxable trusts (typically those trusts which file an annual tax return) to register using HMRC’s Trust Registration Service (“TRS”).
The legislation has now been extended to comply with the fifth EU directive “MLD5” such as to require registration of all express trusts, regardless whether they have a tax consequence, unless spared from registration by one of the narrow group of exclusions.
With no tax obligations, many trusts impacted by this latest change will not have, nor historically have needed, professional advisors and so the scope for trustees to be unaware of their obligations is much increased.
1. Property Co-Ownership
Where one or more persons collectively own land / buildings but not all of them hold legal title, registration is likely to be required. The individuals themselves (rather than the trustees) are likely to be taxable on any income, such that the taxable trust obligation did not apply in 2017.
More detail on our farming blog here.
2. Will Trusts
It remains pretty common for a will to create a trust on death, including where the trust asset is a share in the family home. Usually no income is generated and so the taxable trust obligation didn’t apply in 2017.
In other instances, a trust may exist to pay income to a surviving spouse and arrangements might have been made to mandate that income to the surviving spouse so they can report the income directly on their personal tax return. Again, the taxable trust obligation won’t have applied until/unless there was a CGT or inheritance tax event, but the September 2022 obligation will apply.
3. Bare Trusts
Whilst potentially within one of the exemptions for property co-ownership or bank accounts for minors, bare trusts are not an exempt category and so registration will be obligatory in some circumstances.
There will, of course, be other circumstances where registration is required.
The next step
Should you think that you have an obligation under MLD5 to register a trust by 1 September 2022 please get in touch with your usual UHY contact or with Graham Boar at the Letchworth office.
