The UK's tax authority, HM Revenue & Customs, has announced that its online Trusts Registration Service will not be ready for launch this month (June 2017) as originally intended. The service launch was intended to coincide with the beneficial owner registration requirements of the EU’s Fourth Money Laundering Directive, transposed into UK law today.
HMRC says it is working hard to have a service in place 'very shortly' for lead trustees and personal representatives, who have until 5 October 2017 to register new taxable trusts and until 31 January 2018 to provide information on existing trusts.
UK Trusts – New registration requirements
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. For the moment, details about the mechanics of filing have not been published.
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.