What are the latest TRS changes?

The UK TRS was originally introduced in 2017, with the aim of improving transparency around the beneficial ownership of assets held in trusts with UK tax liabilities.

The Fifth Money Laundering Directive regulations (the regulations), which came into effect in October 2020, significantly extended the scope of the TRS, and since 1 September 2022, most UK trusts have been required to register. Lead trustees are now under obligations to maintain the record of a trust and details of beneficiaries, unless they are subject to any of the current exemptions available for certain trusts.

HMRC have produced an internal manual to accompany the TRS, which is regularly updated. It is important to keep abreast of these updates, not only to advise trust clients of their obligations, but also to be aware of your own obligations to HMRC and reporting concerns.

Who should be considering the TRS?

The regulations set out that ‘relevant persons’ are required to check that the trust is registered (if applicable) on the TRS, and that the information provided by the trustees is up to date. Any practitioner engaging in works relating to trusts is classed as a relevant person for the purposes of the regulations.

Relevant persons can discharge their obligations by:

• requiring the trustee (or their agent) to provide an up-to-date excerpt from the register, if the trust is required to be registered (TRSM20000). The certificate of proof of registration will set out this information and can be downloaded by the lead trustee from the TRS portal.
• checking for any material discrepancies (TRSM70050) between information contained in the excerpt and any information which otherwise becomes available to relevant persons in the course of carrying out their duties under the Money Laundering Regulations.

If this information does not match or is not available (if for example, a trustees was unaware they needed to register a trust), this will be a discrepancy, and you must take steps to resolve this immediately.

Discrepancies

You must seek to resolve any discrepancy with the trustees or their agent prior to the commencement of a ‘business relationship’. You must consider carefully whether you should cease or suspend their business relationship until the discrepancy is resolved. For example, in a case where the trust should be registered on the TRS, but the trustees were unaware and you are instructed to register the trust in addition to the relevant works, the discrepancy is being resolved and therefore there would be no need to cease working for the client. There is no requirement for the relevant person to report, or cease engagement with, any trust that they are in the process of registering.

HMRC advise you to refer to your own organisation’s risk assessments, policies, and procedures before commencing or continuing a business relationship in relation to trusts, where there is a discrepancy.

You must give trustees the opportunity to resolve a discrepancy themselves, as the responsibility for the TRS lies with them. However, if they fail to resolve the discrepancy, you will have to cease your business relationship, and you must report the discrepancy to HMRC, by reporting the issue to your Money Laundering Reporting Officer (MLRO) as soon as reasonably practical.

There is no set timeframe, however HMRC recommends allowing a short period of time, not exceeding 30 days from the date at which the proof of registration was requested, for relevant persons to acquire the excerpt of the register from the trustee before they consider whether they should cease their engagement with the trust and make a discrepancy report to HMRC.

Conclusion

TRS obligations are now not just an administrative requirement of trust administration, but extend to any practitioner engaging in matters where there are trusts involved.

Practitioners need to be aware of the risks of failing to identify discrepancies and should familiarise themselves with the updated HMRC guidance and legislation, and consider their compliance obligations carefully.