HMRC’s Trust Register
04 / 12 / 2017
In recent years, trustees have seen the introduction of new compliance regimes aimed at tackling money laundering and terrorist financing. The recent attention-grabbing headlines concerning the Paradise Papers data leak highlight the concern of the public and HM Revenue and Customs (HMRC) that individuals are avoiding tax and hiding their wealth in overseas trust structures. To help to tackle this problem, new rules emanating from EU law and the Fourth Money Laundering Directive (“the Directive”) have been introduced requiring trusts to be transparent about who is the real controller and owner of the trust assets.
The four main commandments of the Directive are for trustees to:
- maintain an up-to-date record of all those interested in the trust. This includes trustees, beneficiaries, and anyone who has transferred assets into a trust or who can exert control over the trust assets or influence the trustees’ decisions;
- provide banks and other financial institutions who act for the trust with this information;
- provide law enforcement authorities including HMRC, the Financial Conduct Authority and the Police with this information, if required; and;
- file information on these interested parties with HMRC for the new central Trusts Register.
Trustees will now be obliged to obtain and provide HMRC with information about the identity and tax status of certain individuals interested in the trust. This obligation extends to individuals named in a letter of wishes in some
With notable exceptions, such as charitable trusts, the completion of the Trusts Register is obligatory for all taxable trusts and complex estates and the rules imposed in this Directive will affect private UK family trusts, which are already transparent for tax purposes.
If the requirements imposed by the Directive are breached, trustees risk civil and criminal penalties including imprisonment for up to two years unless they can show they “took all reasonable steps and exercised due diligence” to ensure that the requirements are complied with.
HMRC’s Trusts Register online portal was launched on 17 October 2017. The deadlines for filing information for the Trusts Register vary depending on the circumstances of the trust, but are broadly 3 January 2018 for trusts not previously notified to HMRC and 31 January 2018 for trusts that have been previously notified.
At this stage, the Trusts Register will not be open to the public, although we are monitoring proposals at EU level for Trusts Registers across the EU to be publicly accessible. These proposals have met firm opposition from the UK and within the EU on privacy and Data Protection grounds, and it remains to be seen whether they will progress.
To discuss how the Trusts Register affects your trust or for assistance in completing the registration requirements, please contact us.