If you are the trustee of a non-UK trust which has UK assets or UK sources of income, you need to take action before 5 March 2018 or face potential civil and even criminal penalties.
The EU's Fourth Anti-Money Laundering Directive (4MLD), sanctioned in 2015, included provisions designed to increase the transparency of companies, Trusts and other structures, with a requirement for each EU Member State to keep a register of Trusts. UK regulations to implement the UK Register of Trusts came into force on 26 June 2017 and HMRC published guidance in October and November 2017 (Guidance). As you'd expect, the rules catch UK trusts, but the unwary may not realise that non-UK trusts with UK assets or income also need to be registered.
The function of the Register is twofold:
- to provide a Register of the beneficial ownership of relevant Trusts as envisaged by 4MLD; and
- as a means for trustees to register Trusts with HMRC for the purposes of obtaining a Unique Tax Reference Number (UTR) and delivering tax returns.
As a consequence, in May 2017 HMRC withdrew the old paper registration form and in October 2017 they launched an online portal.
The rules apply to occupational pension schemes and charitable trusts as well as complex deceased's estates (as defined in the regulations).
Who can access the Register?
At the moment the Register may be inspected by any law enforcement authority, which includes HMRC, the Financial Conduct Authority, the National Crime Agency, the various UK police services and the Serious Fraud Office. The EU's Fifth Anti-Money Laundering Directive, which requires Trust Registers to be made public, is still being considered in the EU legislative process.
Who has to register and when?
All UK Resident Trusts with UK tax consequences in a given tax year are required to register or update their details on the Register. The taxes in question are income tax, capital gains tax (including non-resident capital gains tax),inheritance tax, stamp duty land tax and stamp duty reserve tax (a tax on certain investment transactions).
Trustees of non-resident UK Trusts only need to register, or update their details on the Register, in respect of a given tax year if the Trust receives UK source income or has UK assets on which the trustees have incurred a liability to pay any of the above taxes in that tax year. This includes a situation in which the Trust holds UK assets indirectly (for example via a non-UK company) and for the purposes of UK tax, look-through procedures apply so that the trustees are liable for UK taxes.
Trusts which only became liable for income tax or capital gains tax for the first time during the 2016/17 tax year and had not previously registered using the old paper form had to do so by 5 January 2018 – the usual deadline being 31 October following the end of the relevant tax year.
Trusts liable for relevant UK taxes in the 2016/17 tax year which had already registered using the old paper form have to register prior to 5 March 2018.
For future years the deadlines are different.
What information must be provided?
The trustees have to provide information on the identities of the settlor(s) even if they died many years ago, the current trustees, all other natural or legal persons exercising effective control over the Trust, for example a protector, and the beneficiaries. There is detailed guidance provided by HMRC in relation to which beneficiaries have to be identified, including in relation to discretionary trusts where there are classes of beneficiaries but who may never receive any benefit from the Trust Fund. The information includes the person's name, date of birth, national insurance number or UTR (or, if none, their residential address) and, if they are non-UK resident, their passport or ID number, and country of issue and expiry date.
Other matters covered by the same regulations
Trustees must disclose in their investment transaction business relationships that they are acting as a trustee and must, on request by any law enforcement agency, supply details of their beneficial owners and potential beneficiaries (including those indicated in a Letter of Wishes). This means that even those Trusts who are not required to register on the Trust Register must still keep details of beneficial owners in case this information is requested.
Trustees can be also be asked by any financial institutions, investment providers and advisers with which the Trust does business to supply details of their beneficial owners and must update the details supplied within 14 days of the trustees becoming aware that information has changed.
Penalties for non-compliance
These are not finalised, but are to include civil and criminal penalties, including a fine and up to two years in prison. The Guidance indicates that any civil penalty will be 'proportionate to the offence committed'.