Trusts – New registration requirements
10 November 2017
**Latest update below**
The UK has adopted the EU's Fourth Anti-Money Laundering Directive ("4AMLD") into domestic law and, as of 26 June, new disclosure requirements apply to trusts. Detailed information about trusts will have to be reported to HM Revenue and Customs ("HMRC"). This information will not be made public. Access to it will be granted on request to various authorities including the National Crime Agency and financial intelligence units in other EEA states.
The UK legislation titled Money Laundering, Terrorist Financing and Transfer of Funds (Information of Payer) Regulations 2017 (the "Regulations") imposes new obligations on trustees of UK trusts and non-UK trusts which receive income from a UK source or have assets in the UK on which a UK tax liability arises (defined as "relevant trusts"). Trustees of relevant trusts (and in the case of a collective investment scheme, this will include the manager or operator of such scheme) will be required to keep accurate and up-to-date records of all "beneficial owners" and "potential beneficiaries" of the trust. For these purposes, beneficial owners are the settlor, the trustees, the beneficiaries (or a class of beneficiaries) and anybody other than the trustees with control over the trust. "Potential beneficiaries" will include any individuals referred to as potential beneficiaries in a letter of wishes or any other document from the settlor relating to the trust. "Control" means a power under the trust instrument or in law enabling an individual to, for example, dispose of, pay or apply trust property, approve distributions, add or remove beneficiaries, appoint or remove trustees, or to veto the exercise of such powers.
Trustees will also be obliged to provide these details on request to law enforcement authorities and, when entering in a business relationship, to certain professionals or professional institutions who under the Regulations are required to apply customer due diligence measures. The Regulations state that providing this information is not to be taken as breach of any restriction on the disclosure of such information and where any disclosure is made in good faith no civil liability will arise on the part of the trustees.
The new law establishes a register of beneficial ownership which will be held by HMRC. It will contain information about taxable relevant trusts. Trustees will be required to submit details of the beneficial owners and potential beneficiaries, including their addresses, dates of birth, national insurance numbers or passport numbers (if the address is outside the UK). They will also have to file a statement of accounts describing trust assets and identifying the value of each category of trust assets. This will include the address of any property held by the trust. The first filing deadline for all relevant trusts will be 31 January 2018.
In March, the European Parliament voted to expand the scope of 4AMLD to create a register of trusts open to the public. The Information Commissioner's Office (in charge of enforcing data protection laws) has already raised concerns that a public register may pose a real risk of identity theft given the sensitive personal data submitted. It insists therefore that any legislation to this effect should - similarly to the measures introducing the Persons of Significant Control register for companies – go through full parliamentary scrutiny and public consultation.
For the time being, the public register proposals do not affect the new Regulations. The government has stated that it will consult separately on the proposed amendments to 4AMLD once the original legislation is in force.
UPDATE: On 10 July 2017, HMRC launched its Trusts Online Service via which trustees will be able to register new trusts and report the required beneficial ownership information.
UPDATE 2: HMRC have issued further guidance on the new Trust Registration Service ("TRS") in September 2017. HMRC have informed us that the service should become available to agents to register on behalf of trustees from October 2017 (although there has been no sign of this service so far) and lead trustees can enter updates for changes of circumstances from early 2018.
All relevant trusts with taxable consequences (i.e. a liability to income tax, IHT, CGT or SDLT) in 2016/17 must report specific information including the name of the trust, where it is resident, details of trust assets and the identity of the settlor, trustees and beneficiaries to TRS by 31 January 2018 and thereafter this information must be reviewed and submitted each year the trust has a tax consequence. HMRC have extended the deadline for self-assessment registration for complex trusts and estates first liable to self-assessment in 2016/17. They would usually need to register by 5 October 2017 but this deadline has been extended to 5 December 2017 for this year only.
UPDATE 3: The trusts registration service became available to agents on 17 October. All recently created and new trusts need to be registered on this service by 5 December 2017. All existing trusts must be registered by 31 January 2018. For more information please contact Sue Hickley.
UPDATE 4: HMRC have announced an extension of the deadline for registering new trusts with the Trust Registration Service (TRS) to 5 January 2018. The deadline applies to trusts which have incurred an income tax or capital gains tax liability in the tax year 2016 to 2017. This extension only applies to the first year of the TRS and the deadline for existing trusts to register remains unchanged (31 January 2018).
We await further developments and we shall keep you updated on the progress of the new TRS but in the meantime, please get in touch with Adam Herbert, Rupert Wilkinson or Tim Fullerlove if you have any questions regarding the impact of these measures.
This note is intended for general guidance only and should not be treated as a substitute for specific advice. If you are a trustee, you should seek professional legal advice to confirm the extent of your legal obligations under the new Regulations.