Families have been using trusts to preserve and manage their wealth for centuries. Unlike corporate vehicles, the lack of rigid formal requirements for the creation and operation of trusts, and the tremendous flexibility of trust instruments, make them uniquely useful for estate and succession planning.

Although many of the tax benefits that were associated with trusts have been eroded in recent years by anti-tax avoidance legislation, they still offer great advantages – particularly for individuals who:

Are changing, or planning to change, their domicile, residence or citizenship
Have family members that are resident abroad
Are seeking asset protection
Are looking to dispose of their estate on death freely and without recourse to a lengthy and expensive probate procedure.

The practical advantages of setting up a trust are gained from the distinction that is drawn between the formal or legal owner of property, the trustee, and those people that have the use or benefit of the property, the beneficiaries.

It is vital that the trustee remains independent and exercises proper control over the trust property. A trust may be deemed to be invalid if the settlor continues to exercise power over the trust assets by retaining benefit or control, or by giving directions to the trustees.

Those unfamiliar with the trust concept are often concerned by the idea of transferring ownership of their property to a trustee. This concern can be alleviated if the trust concept and the distinction between legal and beneficial ownership is properly understood and it is clear that the trust is governed by a reliable trust law that can be enforced in a reputable jurisdiction.

Sovereign has more than 30 years’ experience of setting up and managing various types of trust both in the UK and overseas. We are authorised and licensed to establish trusts and provide professional trustee services in the following jurisdictions:

Onshore – Cyprus, Malta and the UK
Midshore – Hong Kong, Mauritius and Singapore
Offshore – Gibraltar, Guernsey and the Isle of Man

Importantly, non-UK property that is settled into a trust by a settlor who is not domiciled (or ‘deemed’ to be domiciled) in the UK becomes excluded property for UK Inheritance Tax (IHT) purposes. Trusts benefitting from this status are usually referred to as ‘Excluded Property Trusts’ (EPTs) and effectively offer permanent shelter from IHT, even if the settlor subsequently acquires a UK domicile or becomes deemed UK-domiciled (provided that certain conditions are met). Furthermore, any gains made by assets in this form of trust – or that are made by any underlying offshore company held by the EPT – will not generally be subject to UK CGT.

UK Trust Registration Service

The Trust Registration Service (TRS) is a register of the beneficial ownership of trusts and ‘complex estates’. It was set up for taxable trusts under the EU Fourth Anti-Money Laundering Directive (4AMLD) in 2017 and extended to all express trusts (unless exempt from registration) and some non-UK trusts by 5AMLD in 2021. The UK agreed to maintain the TRS as part of the Brexit Withdrawal Agreement.

The UK taxes in scope for taxable trusts are Income Tax, Capital Gains Tax (CGT), Inheritance Tax (IHT) and Stamp Duty Land Tax (SDLT) – or its equivalent in Scotland and Wales.

An express trust is any trust that was deliberately created by a settlor who expressly transfers property to a trustee. This can be by Will, to take effect on their death, or by Settlement Deed in their lifetime.

Trusts excluded from the requirement to register, include:

Pension schemes
Charitable trusts
Will trusts that are wound up within two years of death
Policy trusts paying out on death or critical illness
Existing trusts with a value of less than £100 created prior to 6 October 2020

Existing relevant taxable and non-taxable trusts were required to be registered by 1 September 2022. Non-taxable trusts created after September 2022 are required to be registered within 90 days of establishment. Taxable trusts set up on or after 4 June 2022 must be registered within 90 days of the trustees becoming liable to pay UK taxes.

Non-UK trusts must be registered if they have at least one UK-resident trustee or if they acquire land or property in the UK. Trusts already registered in another EU Member State are automatically exempt from UK registration.Error! Hyperlink reference not valid.

The trustees are responsible for registration. They are required to keep accurate and up-to-date written records of the beneficial owners, including settlors, trustees, beneficiaries and any individual who has control over the trust, such as a protector. These persons may be individuals or legal persons such as companies. Once a trust is registered on the TRS, any changes to the trust details or circumstances must be registered within 90 days.

If a trust has multiple trustees, they can nominate one of the trustees to act as the lead trustee to register the trust. The lead trustee is then responsible for the administrative duties in relation to the tax affairs of the trust and is obliged to keep the register updated each year or when certain specific events occur. HMRC may impose penalties and fines for non-compliance on trustees who fail to comply with the registration requirements.

Where a beneficiary is named on a trust instrument, separate from members of a named class, then they can clearly be determined and trustees must provide the relevant information. Where a beneficiary is un-named, being only part of a class of persons, a trustee will only need to disclose the identities of the beneficiary when they receive a financial or non-financial benefit from the trust.

Trustees must also register ‘complex estates’ on the TRS. These are estates where the total tax liability (income and capital gains) for the entire administration period exceeds £10,000, or the probate gross value exceeds £2.5 million or where the value of the assets sold by the personal representative in any tax year exceeds £500,000.

The data on TRS is only available to those with a ‘legitimate interest’, such as law enforcement agencies investigating money laundering and the financing of terrorist activities. HMRC can refuse access where there is a disproportionate risk of exposing the beneficial owner for example to fraud, blackmail, or intimidation.
The TRS must be updated if the trust becomes liable to income or capital gains tax or if there are any changes to trustees’, beneficiaries’ or settlors’ details. Changes must be recorded on TRS within 90 days of the change to avoid fines and penalties.

Details of the register will only be released in certain circumstances to those with a ‘legitimate interest’ such as law enforcement agencies where there is evidence of money laundering or terrorist financing activity. Beneficiary information will not be disclosed if there is a risk of fraud, kidnapping, blackmail, extortion, harassment, violence, or intimidation, or where a beneficiary is a minor, or otherwise legally incapable.

Trusts that register on the TRS will be issued either a trust Unique Taxpayer Reference (UTR) if the trust is liable to pay UK tax, or a Unique Reference Number (URN) if the trust does not have to pay UK tax. HMRC will issue this UTR/URN to the lead trustee of the trust. Third parties are required to have formal confirmation that the trust is registered and up to date on TRS before they can act for you.

Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.