WHAT IS TRS?
Trust registration requirements first appeared in 2017 when the UK adopted the terms of 4th Money Laundering directive (4MLD) by means of “The Money Laundering, Terrorist Financing and transfer of Funds (Information on the Payer) regulations 2017".The intention was to capture a substantial amount of data on trusts to ensure compliance with the directive.
The initial directive (4MLD) was intended to capture data on trusts that should already have notified their existence to HMRC and where appropriate have filed returns and paid tax. The key to understanding 4MLD is that it applies to taxable trusts but only if the trustees have a tax liability. HMRC refer to these as taxable “relevant property” trusts. These trusts now also need to register with the TRS. As these trusts should all by now have reported their existence to the TRS they may now face late payment penalties.
The subsequently directive (5MLD), now means all non-exempt UK express trusts need to register regardless of whether they are bare or relevant property trusts and regardless of being “taxable”. HMRC systems cannot yet process non-taxable trusts but expect to be able to do so by early September 2021. From that point impacted trusts will have 12 months to register. There are also now clear requirements for relevant parties dealing with trusts in terms of due diligence (i.e., are the trusts reported accurately & completely) and for discrepancy reporting. This responsibility sits with advisers, providers, discretionary managers, and others. It is likely that trusts that miss the deadline will find all dealings with these parties frozen until the trust gets up to date with TRS reporting.
For more information on the 'Basics of TRS', please see the links below: