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AML requirements for trustees and the Trust Registration Service ('TRS'): Deadline approachi


The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘AML 2017’) came into force on 26 June 2017, implementing the Fourth Anti Money Laundering Directive. It set out, inter alia, the reporting and record keeping obligations of trustees of relevant trusts. The Trust Registration Service (‘TRS’) (for the online registration of certain trusts) was principally brought in by HMRC to put into effect AML 2017 as applicable to trustees. The TRS replaces the old 41G(Trust) paper form which was withdrawn in April 2017.

In this post I want to highlight to readers the deadline that is fast approaching, and in doing so I will review the obligations that trustees are now under as a result of AML 2017.

The reporting requirements placed on trustees are now significant. The obligations under AML 2017 and the Common Reporting Standard (‘CRS’) are onerous and undoubtedly herald the end of opaque structures (even ones which had privacy as a core aim rather than any tax avoidance/evasion motive).

Tax ‘transparency’ is the political phrase of the moment. As a result of the leaks arising from the ‘Paradise Papers’ and ‘Panama Papers’ the public has very little stomach for the perceived unfair (and in some cases unlawful) structuring put in place by wealthy individuals. This in turn puts pressure on the government to be seen to be acting forcefully against tax structuring behaviours, be they legitimate or not. As a consequence we are provided with regulations and legislation which arguably go too far and ride roughshod over any right to privacy. This is an interesting debate in itself, tax transparency v the right to privacy: one for a later post.

To the extent that trustees or beneficiaries are concerned about their obligations under the CRS or AML 2017, or indeed any wider UK tax obligations, Auxilium Tax is well placed to advise, and if needed, assist in ensuring compliance with the current law. In addition, should trustees wish to appoint an agent to look after the filing process with HMRC, Auxilium Tax would be happy to assist.

Reporting deadlines under the TRS

Trustees of taxable relevant trusts (more on which below) with an income tax or CGT liability in 2016/17 who have not previously registered for Self-Assessment need to register their trusts by 5 January 2018. This is an extended deadline beyond the original 5 October 2017 deadline. Time is therefore fast running out.

Trustees of taxable relevant trusts with other tax liabilities in 2016/17 or income and CGT liabilities previously registered with HMRC should register by 5 March 2018.

Trustees of taxable relevant trusts with a UK income tax or CGT liability that arose for the first time in the 2017/18 tax year should register by 5 October 2018.

Trustees of taxable relevant trusts with other tax liabilities for 2017/18 or an income or CGT liability already registered with HMRC in 2017/18 need to register by 31 January 2019.

Requirements of AML 2017

Regulations 44-45 of AML 2017 set out the requirements placed on trustees in terms of record keeping of beneficial ownership. The regulations are applicable to ‘relevant trusts’. A relevant trust is defined in regulation 42(2)(b) as:

  1. “ A UK trust which is an express trust; or

  2. A non-UK trust which is an express trust; and

(aa) receives income from a source in the United Kingdom; or

(bb) has assets in the United Kingdom,

on which it[1] is liable to pay one or more of the taxes referred to in regulation 45(14)”.[2]

Trustee obligations (regulation 44)

Once the trustee has established whether the trust under its stewardship is a ‘relevant trust’, regulation 44 will then need to be considered. This regulation outlines trustee obligations’; which include the following:

  • Maintaining up to date and accurate records of all the beneficial owners of the trust and any potential beneficiaries (regulation 44(1))

  • ‘Beneficial Owner’ in relation to a trust is defined in regulation 6 of AML 2017 and includes:

  • the settlor;

  • the trustees;

  • the beneficiaries;

  • where the individuals (or some of the individuals) benefiting from the trust have not been determined, the class of persons in whose main interest the trust is set up, or operates;

  • any individual who has control over the trust.

By including ‘any person who has control’ over the trust the regulations catch protectors and appointors who may have only limited powers of veto over certain trustee powers or just the sole power of appointing/removing trustees for example (see regulation 6(2) for the complete definition).

  • The meaning of ‘potential beneficiaries’ is expanded upon in regulation 44(5)(b) and catches individuals named as possible beneficiaries in ‘a document from the settlor relating to the trust such as a letter of wishes.’

  • When the trustee of a relevant trust enters into a relevant transaction with a relevant person or forms a business relationship with a relevant person the trustee must:

  • Inform the relevant person that it is acting as trustee; and

  • On request of the relevant person provide him or her with information identifying all the beneficial owners of the trust.

A ‘relevant person’ is defined in regulation 8 and includes inter alia, financial institutions, accountants, tax advisers and lawyers carrying on their respective businesses in the UK.

A ‘relevant transaction’ is defined as any transaction where the relevant person is required to apply its own customer due diligence measures under AML 2017.

This therefore requires trustees to notify banks, lawyers, accountants tax advisers etc when they are seeking their respective services and are acting as trustee of a trust. The trustee is also required to provide the relevant person with information relating to the beneficial owners if requested.

Trustees are required to notify relevant persons when information they have provided them with changes (reg 44(3)) and are required to provide information about beneficial owners and potential beneficiaries if requested to do so by any law enforcement authority (reg 44(5)).

Register of beneficial ownership (regulation 45)

Regulation 45 requires HMRC to maintain a register of beneficial owners and potential beneficiaries of taxable relevant trusts (i.e. a relevant trust liable to UK Taxes).

Trustees must therefore provide HMRC with the following information in relation to the trust (reg 45(5)):

  • The full name of the trust;

  • The date on which the trust was set up;

  • Statement of accounts for the trust;

  • The country of trust residence;

  • The country of trust administration;

  • A contact address for the trustees;

  • Details of legal, financial or tax advisers.

And, the following information in relation to the beneficial owners and potential beneficiaries (reg 45(6)):

  • The individual’s full name

  • The individual’s NINO/UTR if any;

  • The individual’s address if he or she has no NINO or UTR (if not UK resident the passport number of the individual or details of any similar form of identification);

  • The individual’s date of birth;

  • Role in respect of the trust;

If the beneficial owner is a legal entity (reg 45(7)):

  • The entity’s name;

  • UTR if any;

  • Registered office;

  • The legal form of the entity and its governing law;

  • If applicable the name of the register of companies on which the entity is entered and its registration number;

  • The entity’s role in relation to the trust.

Where the class of beneficial owners include a class of beneficiaries yet to be determined, a description of the said class.

This information must be provided to HMRC by 31 January after the tax year in which the trustees were first liable to pay the UK taxes mentioned in the footnotes. The trustees must notify HMRC of any changes to the information provided (s 45(9)).

The Trust Registration Service

The TRS provides a straightforward way for trustees of relevant trusts to meet their disclosure requirements under AML 2017 and for HMRC to meet its requirements under AML 2017. Should trustees wish to appoint an agent to look after their TRS reporting, Auxilium Tax are well placed to assist.

[1] Query whether a non-UK trust has any liability to UK taxes (as it has no legal personality it is surely the trustees who are liable to pay any UK tax rather than the trust, which in essence is just a bundle of rights and obligations).

[2] Income tax, CGT, IHT, SDLT, land and buildings transaction tax (Scotland), and SDRT (‘UK Taxes’).

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