Introduction

In our pensions update published on 15 February 2008 we noted that, as a result of the Money Laundering Regulations 2007, there will be a new requirement for trustees “acting in the way of business” to register with HM Revenue and Customs (HMRC) by 1 April 2008. This briefing note outlines the guidance currently available from HMRC.

The new money laundering requirements

The Money Laundering Regulations 2007 (the Regulations) came into force on 15 December 2007. Under the Regulations, HMRC is the supervisory authority for a number of different service providers, including Trust or Company Service Providers (TCSPs). HMRC’s role is to maintain a register of a range of businesses, including TCSPs, which are not supervised for money laundering purposes by any other professional regulatory body. HMRC also aims to ensure that these businesses are aware of, and comply with, the requirements of the Regulations and that they have appropriate risk-based anti-money laundering controls in place.

Who needs to register with HMRC?

The new registration requirements apply to businesses which carry out TCSP activities and which act as trustees “by way of business”. Where the relevant business activity is not supervised by the Financial Services Authority or one of the other designated professional bodies listed at Appendix 2 of HMRC’s Guide to Registration, the business will need to be registered with HMRC by 1 April 2008.

What is “by way of business”?

In its guidance, HMRC sets out the following questions for trustees to consider when deciding if they are carrying out their trustee activities “by way of business”, as this term is not defined in the Regulations:

  • Have you set up a business with the intention of undertaking relevant activities (i.e. as a TCSP)?
  • Do you advertise or publicise the provision of your services?
  • Is the relevant activity carried out for money or other benefit?

If the answer to all three of the above questions is no, then it is likely that the activity is not being carried out by way of business and registration with HMRC will not be necessary. It therefore seems clear that where individuals act as unpaid pension scheme trustees, or as unpaid directors of corporate pension trustees, they are not acting by way of business and do not need to register with HMRC. Conversely, where trustee activities are carried out full-time on a professional basis and for payment, that trustee is acting by way of business and is a TCSP.

Can trustees be paid by the scheme’s sponsoring employer for their services without being a TCSP?

Unfortunately, what remains unclear in HMRC’s current guidance is whether the requirement to register applies when trustees or directors are paid by the sponsoring employer of the scheme in recognition of their trustee work - even if such payment simply relates to paying the trustees’ expenses. The guidance does state that, where someone acts as a trustee for an occupational scheme of which he is a member and receives nominal payments from the employer to attend trustee board meetings, he will not need to register as a TCSP, as long as he does not act as a trustee by way of business for other pension schemes of which he is not a member. HMRC recognises that where trustees are unsure whether or not they are required to register, they may need to contact HMRC for advice. The relevant contact details appear at the end of this briefing.

Registering with HMRC as a TCSP

Where a service provider was in business as a TCSP before 15 December 2007, an application to register must be made to HMRC by 1 April 2008. Failure to do so may result in a civil penalty. If a new TCSP business is being set up, an application to register with HMRC must be made before carrying on that business.

When a service provider decides that the business concerned should be registered with HMRC, registration form MLR 100 should be completed and submitted, together with the relevant registration fee. Where a business is to be registered as a TCSP, there is an annual registration fee of £95 per business premises. There is also a one-off fee of £50 for each individual within the registering business who needs to be assessed under HMRC’s “fit and proper” test for suitability to act as a TCSP. This separate part of the registration is achieved by completing form MLR 101. Forms are available on the HMRC website, together with a summary of the registration process. If any of the information provided to HMRC subsequently changes, the amended details must be notified to HMRC within 30 days of the change.