The UK government has confirmed that a beneficial ownership register for trusts will operate from Summer 2017.
The register is being created as part of the UK’s implementation of the 4th Anti-Money Laundering Directive. We covered the first consultation here. The government has now published its response – confirming that the register will go ahead – and is running a more focussed consultation on the details of the legislation.
Other aspects of the trust register which have now been clarified include the following:
Who will operate the register?
The register will be operated by HMRC
Will the register be public?
The register will not be public at this stage. The 5th Money Laundering Directive, which contains a proposal for trust beneficial ownership to be made public, is currently making its way through the EU legislative process and (notwithstanding Brexit) if passed, the UK government will consult separately on its implementation.
What type of trust will need to be registered?
All express trusts with UK tax consequences (so excluding most bare trusts) will have to register. An express trust is one that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose as opposed to a statutory, resulting or constructive trust. It does not include investment trusts where there is no transfer of legal ownership of property from the settlor to the trustee. And it does not automatically include contracts, wills and testaments: they will only be registrable if they create an express trust which generates a UK tax consequence.
A UK tax consequence will arise if the trust incurs UK liabilities for income tax, capital gains tax, non-resident capital gains tax, inheritance tax, stamp duty land tax or stamp duty reserve tax. Consequently, UK resident trusts with UK tax liabilities will be required to register as will trusts that are resident outside of the UK but have a UK tax liability. Trusts can fall into, and out of, the duty to register each year depending on their tax situation.
How often will information need to be reported?
As a minimum, trustees will be required to update the register once a year in each year that the trust generates a UK tax consequence. Any changes must be notified to HMRC by the end of the tax year – which could be difficult in relation to changes (particularly deaths) which occur towards the end of the tax year, particularly as trustees may not wish to wait until the final day of the tax year to file their confirmation that no changes have occurred.
What information will need to be reported?
Trustees will be required to provide information on the identities of the settlors; other trustees; beneficiaries; all other natural or legal persons exercising effective control over the trust; and all other persons identified in a document or instrument relating to the trust, including a letter or memorandum of wishes.
This information will include:
- their name
- their correspondence address and other contact details
- their date of birth
- if they are resident in the UK, their National Insurance Number (applies to individuals only) or their Unique Taxpayer Reference (applies to non-individuals only); and
- if they are not resident in the UK, their passport or ID number with its country of issue and expiry date.
If a trust has a class of beneficiaries, not all of whom have been determined, then it will not be necessary to report all of the above information. Instead, trustees will need to provide a description of the class of persons who are entitled to benefit from the trust.
Trustees will also be required to provide general information on the nature of the trust. These include its name; the date on which it was established; a statement of accounts describing the assets and their values; the country where it is resident for tax purposes; the place where it is administered; and a contact address. The statement of account could be particularly unattractive for foreign trusts and foundations that hold only part of their assets in the UK.
How will the information be used?
According to the government, the information will be used to give “law enforcement and compliance officers the tools they need to combat the misuse of trusts”. HMRC will also be able to compare the Unique Taxpayer References and/or National Insurance Numbers of the parties to a trust and factor these into its wider understanding of those persons’ tax liabilities.
Are there any changes to the AML rules?
Separate from the trust beneficial ownership register, the same regulations also tighten up the Anti-Money Laundering rules and place an obligation on all trusts covered by the rules to maintain records of all the required information, provide it to other regulated bodies such as banks and estate agents, and inform them within two working days if any details change – including a death or a beneficiary changing their address. The draft regulations do not contain any knowledge requirement, meaning that trustees could be in breach even if they are not aware of a change.
What happens next?
The consultation on the draft regulations runs until 12 April 2017. The government’s final policy decisions will be implemented through legislation to come into force by 26 June 2017.