On May 14, 2018, the Council of the European Union adopted the EU's Fifth Money Laundering Directive (5MLD), with a transposition deadline of around December 2019, and an implementation deadline by February 2020. This will introduce new rules for the TRS.
All advisers are by now aware of the Trust Registration Service (TRS) which started about a year ago. There have been a number of problems with the new system. Some have been caused by the requirements imposed by the EU Directive (e.g. the requirement to identify the named beneficiaries of the trust), others due to technical issues at HMRC where access to the online registration is denied, for example because the system requires the Unique Tax Reference (UTR), trust name or postcode to be matched to HMRC’s records, and this in practice may be difficult to do.
At the moment we are still expecting the TRS GOV.UK guidance, especially when dealing with complex estates. In the meantime, the TRS FAQs which were issued last November will not be updated.
HMRC has allocated a 15-month timeframe to enhance the online functionality and make it more efficient for future service. It will shortly be seeking volunteers to assist with piloting the new system.
In discussions with the Society of Trust and Estate Practitioners HMRC has said that it is aware of the widespread dissatisfaction around the penalties and has confirmed that it will take a soft approach this year. However, there will be no more trust registration deadline extensions in 2018.
The 5MLD, coming less than a year after the 4MLD was transposed into national laws of the EU members, was in part a response to the terrorist attacks of 2015 and 2016 in Paris and Brussels, and in part a response to the Panama Papers leaks. It aims to bring more transparency to improve the fight against money laundering and terrorist financing by enhancing the powers of EU financial intelligence units (FIUs) to identify who really owns companies and trusts through beneficial ownership registers.
While in the UK we are still getting to grips with the current TRS, it is not particularly welcome news that new trust registration rules are to be introduced by the 5MLD, which must be transposed into UK law by February 2020. This will extend the TRS to all UK express trusts and non-EU trusts that own UK real estate or have a business relationship with a UK Obliged Entity.
The new Directive will require HMRC to share the trust data with Obliged Entities and anyone with a ‘legitimate interest’ – the latter term will be defined in full in due course. Compare this with the current requirement to register only the trusts that have tax consequences. And the new rules will apply to all new and existing trusts. HM Treasury is to consult on this in Winter 2018/19, followed by a further four-week consultation on draft legislation in Spring 2019.
Whilst the details of the new rules are awaited it would make sense to start keeping records of beneficial ownership of any trust an adviser comes into contact with as well as forewarning clients who are trustees of the forthcoming obligations.
Please note that this document was prepared by a third party and as such Brewin Dolphin is not responsible for the content or able to answer queries on the topics dealt with. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change. Therefore you should not rely on this information without seeking professional advice from a qualified tax adviser, who should also be able to assist you with any questions on the content.
This document was prepared as a general guide only and does not constitute tax or legal advice.