Emma Hosking-Williams (pictured), a Director in Private Client & Trust at EY in the Channel Islands, considers the impact of a new anti-money laundering measure
In June 2015, the EU introduced the Fourth Money Laundering Directive (4MLD), which requires Member States to have implemented it through national law by 26 June 2017. The Directive introduced numerous measures designed to increase transparency and identify beneficial owners of companies, partnerships and trusts.
The UK has adopted most of the measures introduced by 4MLD – the Public Register of Persons with Significant Control (PSC Register) for companies and partnerships is one of the most high profile. The final measure to be introduced by the UK is a new central Trust Register.
On 19 May 2017, HMRC quietly announced that Form 41G (a form used to register trusts and estates for UK self-assessment tax returns) had been withdrawn and would be replaced by a new Trusts Registration Service during summer 2017. Little has been made of the new service, which is being introduced as part of HMRC’s Making Tax Digital agenda.
Previous announcements and updates have been lost among the proposals for wide-reaching changes to the UK’s non-dom and residential property tax regimes. However, whilst those changes were postponed in the run-up to the general election, the new Trust Register is to be introduced as planned.
What does the register entail?
The Trust Register will be a central register held by HMRC and updated annually by trustees. Information to be provided includes:
• Details of trust assets, including values and addresses where relevant
• The identity of the settlor, trustees, protectors, beneficiaries or class of beneficiaries, and any other persons exercising effective control over the trust. Identity information required will include:
• Name
• Date of birth
• National Insurance number if UK resident, unless they are a minor
• For those with no NI number, an address and passport or ID number.
The register will apply to any and all trusts with a UK tax consequence, which could include an income tax, capital gains tax, inheritance tax or stamp duty land tax liability. Registration also applies to trusts that have already registered with HMRC.
When can trusts be registered?
The Trusts Registration Service isn’t currently available, but is expected to be fully operational this autumn. Trustees have been asked to delay notifying HMRC of a new trust or complex estate until the new service is up and running. The Trusts Registration Service is being delivered through a number of phases – initially only lead trustees or personal representatives will be able to use it.
Will the register be public?
There’s no requirement for the Trust Register to be made public at this stage. Instead, it will only be made available to law enforcement and other relevant authorities on request.
Notwithstanding the above, on 28 February 2017 the EU’s Economic and Monetary Affairs Committee and the Civil Liberties Committee agreed amendments to expand the scope of the 4MLD to introduce a public beneficial ownership register for trusts.
The changes are being debated by the European Parliament, EU Commission and the European Council, and the European Parliament has indicated a desire for negotiations between the three EU bodies to be completed by 30 June 2017.
This doesn’t yet mean such public registers will be implemented, but it’s clear that there are strong views in Europe, both for and against the measure.
Impact for trustees
The requirement to provide ownership information for trusts to a central authority will be a new obligation for trustees and is likely to present a number of challenges.
The category of persons to be reported is very wide, going far beyond what was required on Form 41G. The initial consultation suggested that any persons named on a letter of wishes would need to be reported.
This requirement hasn’t been included in the latest guidance and we await further clarity on the extent to which beneficiaries need to be reported.
The valuation of trust assets also takes on added importance as there will now be a requirement to report asset values. It’s currently unclear whether formal valuations are required, or if valuation rules under acceptable accounting standards can be used when reporting the value of assets.
The lack of clarity on these matters makes it very difficult for trustees to plan for the new Trust Register. However, in the absence of further guidance, trustees should ensure that they at least have up-to-date documentation for settlors and active beneficiaries.