The UK now requires most trustees to maintain a register of, and report to HM Revenue and Customs (HMRC) on, beneficial owners in relation to trusts which they administer. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 bring the fourth EU anti-money laundering directive into UK Law. The Regulations came into force on 26 June 2017. The intended effect of the Register is to promote transparency and has been introduced as part of a European-wide crackdown on money-laundering and tax avoidance.
Which trusts must be registered?
The Regulations apply to "taxable relevant trusts".
A "relevant trust" is a UK express trust or a non-UK express trust which receives UK source income or a trust which is liable to pay any of the taxes listed in the Regulations in relation to its assets or income, e.g. Income Tax, Capital Gains Tax, Land and Buildings Transaction Tax.
An express trust is deliberately created by a Settlor expressly transferring property to the trustee for a valid purpose. Statutory, resulting or constructive trusts do not need to be registered.
A UK trust is one where all the trustees are resident in the UK, or where one trustee is resident in the UK and the Settlor was resident and domiciled in the UK at the time the trust was set up or when they added funds to it.
If the trustees are liable to pay Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, Land and Buildings Transaction Tax or Stamp Duty Reserve Tax in the UK on the trust's assets or income, the trust is a taxable trust.
What information is required?
Trustees of a trust to which the Regulations apply must hold adequate, accurate and up-to-date information on the beneficial owners of the trust. The trustees must provide HMRC with information about the identity of the Settlor, trustees, protector (if applicable), all other persons exercising effective control over the trust (if applicable) and the beneficiaries (or class of beneficiaries). All of these are classed as 'beneficial owners' by Regulation 6.
The information will need to include the following:
- A name;
- Date of birth;
- Correspondence address or other contact details;
- If the person is a UK resident a national insurance number must be provided;
- If the person is not a UK resident, a passport or ID number is required;
- Non-individuals will need to supply a Unique Taxpayer Reference; and
- If the trust has a class of beneficiaries, it is necessary to provide a description of the class of persons entitled to benefit.
Information must be provided about the nature of the trust including its name, the date of establishment, a statement of accounts describing the assets, the country it is resident in for tax purposes, the place it is administered and a contact address.
The Register of Beneficial Ownership is maintained by HMRC and is not currently accessible to the public, although this may change if the fifth EU Anti-Money Laundering Regulation is passed and introduced into UK law.
The required information must be provided to HMRC on or before 31st January 2018 or the 31st January following the tax year in which the trustees were first liable to pay any of the aforementioned taxes.
If any required information changes, the trustees must notify HMRC by the 31st January following the tax year in which the change occurred. Trustees are only required to notify HMRC if they were liable to pay a relevant tax in that year.
Additional Information Requirements
In addition to registering the trust with HMRC, trustees are obliged in certain circumstances to inform a 'relevant person' that they are acting as a trustee and, on request, provide the relevant person with information identifying the beneficial owners of the trust. A relevant person is defined by Regulation 8 and includes credit institutions, financial institutions, independent legal professionals and estate agents.
A relevant person may request the information on beneficial owners if the trustee (acting as a trustee) enters into a relevant transaction or forms a business relationship with them. A “relevant transaction” means a transaction in relation to which the relevant person is required to apply customer due diligence measures. If any of the information changes, the trustee must notify the relevant person of the change and the date it took place within fourteen days of becoming aware of the change.
Moreover, the trustees must provide beneficial ownership information to a relevant law enforcement authority on request. These are listed in Regulation 44(10) and include the Financial Conduct Authority (FCA), the various UK police forces and Serious Fraud Office.
Future Changes to the Law
The European Commission has proposed various amendments to the Fourth Anti-Money Laundering Regulations' beneficial ownership rules. Should the proposed changes come into force in the UK, there would be full public access to the register of beneficial ownership of business-related trusts (information on all other trusts would be accessible by those who could show a legitimate interest). It is proposed that the registers of Member States become directly interconnected to facilitate co-operation, and that the information available to authorities is extended.
Get in touch
If you are acting as a Trustee, or have any questions on the effect of the new Regulations, please contact your usual Harper Macleod contact or get in touch via the numbers below.