Trust registration – don’t delay!
HMRC recently launched the online Trust Registration Service (TRS) following the passage of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations (SI 2017/692) (the “Regulations”) which implemented the Fourth Money Laundering Directive in the UK.
The Regulations are complex but in essence require that all new and existing express trusts (of any type, including charitable trusts, will trusts, some bare trusts and also unit trusts) with any UK tax liabilities be registered on the TRS. Trustees also now have a legal duty to hold certain information on a formal written register in case the authorities wish to call on it and are subject to a duty to keep these records up to date and to file a form of annual return. At present the TRS will not be available for public inspection but HMRC will share information on it with both law enforcement and also tax authorities in other countries.
The information that will need to be disclosed by the trustees under the Regulations is detailed:
- the full name, date and type of trust together with the value of the various asset classes held within the trust and a statement confirming where the trust is administered;
- the identity of the settlor, trustees, beneficiaries and other people with influence, control or involvement in the trust (including names, dates of birth, national insurance numbers and passport numbers for those people);
- in the case of a trust arising under a will this will also mean providing details of the deceased and the estate assets, anyone holding a power of appointment and any individuals named in any letter of wishes;
- other trusts will also need to disclose details of a protector, if one has been appointed and if holdover relief was claimed on the transfer of assets into the trust in question;
- if there is a class of beneficiaries, the trustees can describe the class rather than disclosing all the unnamed individuals in that class;
- the contact details for any advisers to the trustees (such as legal, financial or tax advisors or land agent);
- the tax years the trust needs to declare the tax liability for.
It should be noted that excluded property trusts holding UK situs property or receiving UK source income will be caught by the Regulations on a ten-year anniversary or when stamp duty taxes are paid on the purchase of a trust property, irrespective of the settlor’s domicile status.
The trustees must also maintain accurate and up-to-date written records of this information together with certified copies of passports and utility bills for any of the individuals identified above. Surprisingly, the trustees must also notify any relevant person with whom they enter into a business relationship (e.g. instructing solicitors or an estate agent) as well as HMRC of any change in the information recorded in the register within 14 days of becoming aware of the change. These records and copy documents must also be retained for 5 years and HMRC or law enforcement can request that copies are supplied within a reasonable period to ensure that the Regulations are being fully complied with. Clear and up-to-date record keeping will therefore be required in future. Even if a trust does not need to register for TRS (e.g. if it is a simple bare trust) the trustees should nevertheless keep a formal written register which should be kept up to date on the same basis.
Failure to comply
If trustees fail to maintain an accurate and up-do-date record of beneficial owners, or provide HMRC with the required information, HMRC can impose a penalty and publish a public statement about the failure. The trustees will also be guilty of a criminal offence, punishable by imprisonment for up to 2 years or a fine (or both).
Take action now
Originally, all new trusts with a tax consequence needed to register with HMRC by 5 October 2017. There have however been a number of delays in the release of the new online register and the associated guidance so, as a concession, HMRC subsequently confirmed it would not penalise anyone as long as they registered for the service by 5 January 2018. Trusts can still register on the TRS after the deadline (which will have passed by the date of publication) but you should be aware that HMRC may levy a late registration penalty in those circumstances. It is therefore imperative that you arrange for registration to occur without further delay before HMRC’s patience runs out. Once registered, the additional information detailed above will need to be provided by 31 January 2018 through the new online TRS portal, so time is very tight. The deadline for existing trusts to register and file on the TRS remains unchanged at 31 January 2018.
If the Regulations apply to your trust you will also need to start collating the required information from any relevant individuals under the Regulations as soon as is possible. Certified documentation will take time to collect, particularly as banks seem more reluctant to certify documents for their clients, so the sooner the process is started the better.
We can help
One of our solicitors will be pleased to take the required certified copies of your documents if this would be of assistance. We can also provide trustees with detailed advice about the impact of the Regulations and provide a form of template for the trustees to use going forwards to record the necessary information in compliance with the Regulations.