In June 2017 the UK enacted the Money Laundering (Information on the Payer) Regulations 2017 to implement the European 4th Anti-Money Laundering Directive.
The Regulations, among other matters, creates a national register of trusts which covers not only trusts that are tax resident in the UK, but also those trusts resident outside the UK that have a connection with the UK whether a settlor or beneficiary who is resident or domiciled in the UK or assets in the UK. The Regulations require the trustees to register and to continue to update the required details on the HMRC Trust Registration Service (TRS) website.
The Regulation applies not only to trusts, but also foundations and any other legal arrangements that are similar to trusts.
Relevant Trusts
The Regulation applies to ‘Relevant Trusts’ which are defined as either (A) UK express trusts, or (B) non-UK express trusts.
(A.) UK express trusts are trusts in which –
- All the trustees are UK resident; or
- At least one trustee is UK resident and the settlor was UK resident or domiciled either when the trust was established or when further funds were added to the trust.
Most trusts falling under this head as UK resident for UK income tax and CGT will fall into this category. This will be the case even if the trust is considered to be resident outside the UK under the terms of a tax treaty between the UK and the other jurisdiction.
(B.) Non-UK express trusts are trusts that receive UK source income or have UK based assets.
The trustees of Relevant Trusts are required to maintain enhanced records under the Regulation and, if the trust is chargeable to UK tax, the trust must be registered.
The first registrations must be completed by 31 January 2018, but no penalty will be imposed if this deadline is missed, providing registration is made no later than 5 March 2018. There are a number of factors that must be taken into consideration to determine when the registration must be completed and reference needs to be made to the Regulation and other relevant legislation. Care needs to be taken to ensure the correct deadline is met.
Information to be provided
The trustees are required to provide detailed information under the following principle headings:
1. Administrative:
Information is required on the trust’s name, date of creation, where it is tax resident and administered, plus details of the assets which extends to non-UK assets.
2. Details of the ‘beneficial owner’:
Individuals who fall within the definition include the settlor, beneficiaries or a class of persons in which the individual beneficiaries have yet to be identified, anyone who exercises ‘control’ over the trust and the trustees. A person exercising ‘control’ will include a protector. In situations when there is a class of beneficiaries who have yet to be determined the trustees are required to provide a description of that class of beneficiaries.
For those who fall within the scope the trustees must provide details of their full name, date of birth, tax reference number or UK National Insurance Number and details of their connection or role in the trust. Individuals outside of the UK will be required to provide their passport or ID card details. If a beneficial owner is a company details must be provided of that company.
3. Relevant persons:
This applies to relevant transactions or business relationships entered into by a trustee with a relevant person, that is an entity that is required to obtain due diligence on its client ie bankers, accountants, lawyers and other professional advisors. The trustee is required to disclose that they are acting as a trustee and provide details of the beneficial owners, if requested.
In such circumstances, the trustees are required to register and provide details of the relevant person or entity.
Record Keeping
The trustees having provided the required information have a continuing obligation to maintain the information is up to date or confirm that there has been no change. There is also a further obligation on professional trustees to retain the records for five years after the final distribution from the trust, before deleting the information at the end of the period.
Access to the Register
The Register is not open to public inspection. Government departments will have access, including HMRC and UK law enforcement authorities to combat money laundering, terrorism and threats to the financial system.
Penalties
Both criminal and civil penalties can be pursued.
If you have any queries please contact Peter Brigham at p.brigham@rosemont-mc.com