The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations) came into force on 26 June 2017 and impose new registration and reporting duties on trustees, including trustees of pension schemes. Recent guidance from HMRC has clarified the extent of these duties for pension trustees.
In particular, trustees will now need to register their schemes with HMRC’s new Trust Registration Service.
Registration is made online and, for most schemes, must be completed on or before 31 January 2018.
The Regulations implement into UK law the requirements of the EU’s Fourth Money Laundering Directive, and are intended to promote transparency in property ownership and thereby make it more difficult for trusts to be used as vehicles for money laundering. UK occupational pension schemes are typically established under a trust and therefore the Regulations apply to most schemes.
What do trustees need to do?
Register with HMRC
Trustees need to register their pension schemes with HMRC if, as will be the case with the vast majority of UK pension schemes, they pay relevant taxes, such as income tax, stamp duty land tax or capital gains tax, in relation to any of the assets or income of the schemes.
Although most schemes will need to register with the Trust Registration Service on or before 31 January 2018, an earlier registration deadline applies to trusts that have incurred a liability to either income tax or capital gains tax for the first time in the tax year 2016-2017. Trustees must register such trusts by 5 December 2017 to avoid failure-to-notify penalties.
The software for receiving registration may have some teething problems, but it is hoped that these will be resolved in due course.
Maintain beneficial ownership information
The Regulations require pension scheme trustees to maintain accurate and up-to-date records in writing of all the scheme’s beneficial owners, and of any potential beneficiaries. This means the scheme’s members, their dependants, and the scheme employer(s). Trustees should in any case hold clear records that meet these requirements.
Report beneficial ownership information to HMRC
Trustees are required to report their beneficial ownership information to HMRC on or before 31 January 2018.
HMRC has recognised that, for large schemes, it may be administratively difficult to provide detailed information on all of their members and those members’ dependants, and it will therefore be sufficient to identify only the class of beneficiaries if the number of named beneficiaries exceeds 10 (for example: “Employees and former employees of X Company who are or have been members of the Y Pension Scheme, and their dependants”).
Disclose beneficial ownership information to counterparties on request
When trustees enter into transactions to which customer due diligence applies, they must inform the counterparty that they are trustees. On request from the counterparty, trustees must also provide them with beneficial ownership information identifying all of the beneficial owners of the trust (and should update the counterparty if the beneficial ownership information changes). However, HMRC guidance has confirmed that pension scheme trustees only need to identify the class of beneficiary (rather than identifying individuals) where the number of named beneficiaries exceeds 10.
If you are the trustee of a UK pension scheme, you should liaise with your scheme’s administrator to ensure that your scheme complies with the Regulations and is registered with the Trust Registration Service before the registration deadline.
Client Alert 2017-257