Trust registration (5MLD)

This article will provide you with an understanding of the changes to trust registration in the UK.

The register is a response to the Fifth Money Laundering Directive (5MLD)

5MLD is an EU directive for tackling money laundering and terrorist financing. The directive expands on the requirements laid out in 4MLD, which introduced the idea of centrally recording beneficial ownership of certain legal ownership structures - such as trusts. 5MLD expands on those requirements with the aim of creating greater transparency. The UK has committed to applying the directive, regardless of the exit from the EU.

The Trust Registration Service (TRS)

The trust registration service refers to the online facility provided by HMRC to register a trust. The service can be accessed here: Manage your trust's details - GOV.UK (www.gov.uk)

All UK resident express trusts need to register

A trust will need to register with HMRC's trust registration service if any of 1-5 (below) applies.

Understanding the terminology:

UK Resident – An individual which is UK resident in accordance with the statutory residency test. Or a corporation registered in the UK.

Express trust – Any trust, written or otherwise, where a settlor has established a trust by their own intention. For example; using a Discretionary Gift Trust deed. A trust is not an express trust if it is a resulting or statutory trust, these are established through an operation of law. For example; a trust for a minor child as a result of their parent dying intestate.

UK Business Relationship – A business, professional or commercial relationship between the trust and a UK ‘obliged entity’ (any entity which is bound by 5MLD requirements). Particularly where that relationship is long term. This definition can be complex, so for the avoidance of doubt, this would include a relationship with a UK based financial adviser or discretionary fund manager.

Some exemptions apply

The following trusts will be exempt from registration in the UK:

• Trusts imposed by statute, where these do not result from the clear intention of the settlor.
• Certain trusts incidental to commercial transactions.
• UK registered pension trusts.
• Certain trusts used as part of financial markets infrastructure.
• Charitable trusts regulated in the UK.
• Authorised unit trusts.
• Pure protection life insurance policies and those paying out on critical illness or disablement, including group policies. This includes unit linked life policies, unless held primarily for investment purposes.
• Co-ownership trusts, where the trustees and beneficiaries are the same persons. For example, trusts created for the management of residential properties.
• Trusts used by government and other UK public authorities.
• Will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy. This exemption only applies if the trust will be closed within 2 years of the death. 
• Trusts for vulnerable beneficiaries or bereaved minors.
• ’Pilot’ trusts set up before 6 October 2020 which hold no more than £100. Pilot trusts set up after 6 October 2020 need to register regardless of value.
• Personal injury trusts.
• Save as you earn schemes and share incentive plans.
• Maintenance fund trusts.

There is no exemption for investment bonds

HMRC have confirmed that trusts holding only unit linked life assurance policies will be excluded from the need to register. However, they have clarified that this does not extend to unit linked life policies held for investment purposes.

The trust is registered by the 'lead trustee'

Though all trustees are responsible for ensuring the trust is registered, only one trustee can use the trust registration service. The trustees will need to decide which of them will register the trust. HMRC refers to this person as the 'lead trustee'. 

Deadlines for registration

Trusts which have a UK tax liability on UK based assets must update the register each year a tax liability arises. The trustees must update the register by the 31 January following the end of the tax year in which the liability arose.

Trusts closed before 1 September 2022

All trusts in existence on or after 6 October 2020 must register by 1 September 2022. This means a trust closed on or after 6 October 2020 but before 1 September 2022 will not escape registration.

Information captured by the register

The following information is recorded in relation to each settlor, trustee, protector, and named beneficiary*:

• The individual’s name;
• The individual’s month and year of birth;
• The individual’s country of residence;
• The individual’s nationality;
• Mental capacity at the time of registration (used to assess whether any exemptions apply).

*A named beneficiary is a person referred to by name in the trust deed or other supporting documents, such as an expression of wishes.

Discretionary beneficiaries 

Discretionary trusts often specify beneficiaries as 'classes'. For example, Children / Grandchildren. In this case, the trustees will only need to list the class of beneficiary and no personal information is required. Further guidance is available here: TRSM32050 - Trust Registration Service Manual - HMRC internal manual - GOV.UK (www.gov.uk)

The trustees are also required to supply information about the trust, including:

• Name of the trust;
• The date the trusts was created;
• Confirmation of the type of trust (e.g. express trust);
• Details of any UK business relationship (applies to non-resident trusts only);
• Details of any UK land or property the trust holds.

Quilter's range of trusts

All trust deeds offered by the Quilter Platform fall under the definition of ‘express trust’. Trustees will need to check whether an exemption can be applied. For example, where the trust qualifies for the vulnerable beneficiary election. If no exemption applies and the trust is deemed UK resident, the trustees will need to register the trust in the UK.

For the avoidance of doubt, this also includes the trust ranges offered under our previous names, including Old Mutual Wealth and Skandia Investment Solutions. 

Trusts will need to provide evidence of registration

From 1 September 2022 - When entering a ‘new business relationship’ with an ‘obliged entity’ trustees will be required to provide evidence that the trust has registered or confirm it is otherwise exempt. An obliged entity is one which is covered under 5MLD rules which includes financial institutions (such as banks) and investment platforms (such as Quilter). This is an important change for any financial advisers dealing with new trust clients or assisting clients with creating new trusts.

Evidence of registration can be obtained from the trust registration service once registration is complete. Trustees can download a document which can be passed on to an obliged entity.

Evidence of registration is not required for business relationships which existed prior to 1 September 2022. I.e. A trust which holds an account with Quilter prior to 1 September 2022 does not need to submit evidence that it has registered.

5MLD in other Jurisdictions

5MLD is an EU wide directive and applies to all countries within the union. Each country is responsible for translating the directive into local law. Trustees should take care to check whether they could be resident in another country. Rules will differ between countries, but this is likely to be where the trustees are resident, or the trust is administered, in another EU country.

Once a trust is registered in one EU country, it will not need to register in another. This includes trusts which are registered in the UK.

Last updated: June 2022