In our update for July 2017, we reported that the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the New Regulations) came into force on June 26, 2017, the deadline for transposition into UK law of the EU Fourth Money Laundering Directive.
The Money Laundering Regulations 2007 (the 2007 Regulations) require trust or company service providers to register with HMRC if they are not authorised by the FCA (or certain other specified professional bodies) and where they are in the business of offering services as a trustee or director of a trustee company.
The New Regulations define trust or company service providers in the same way as the 2007 Regulations, and thus registration will continue to apply to those acting as trustees by way of a business. However, the classification of occupational pension schemes as low risk trusts under HMRC’s existing guidance, meant professional trustees of those schemes were not required to register with HMRC, and this had caused some confusion.
HMRC’s latest Trusts and Estates Newsletter, which was published on September 14, 2017, contains further information about the new trusts registration service (TRS) under which trustees of certain private trusts (including pension trusts) must register online and provide HMRC with information about the beneficial owners, where this is required by the New Regulations.
Under the New Regulations, HMRC is required to maintain a register of beneficial owners and potential beneficiaries of “taxable relevant trusts”. A taxable relevant trust is a “relevant trust” (broadly speaking, a UK express trust where all the trustees are resident in the UK) that is liable in a given tax year for either income tax, capital gains tax (CGT), inheritance tax, stamp duty land tax (SDLT), land and buildings transaction tax (LBTT) or stamp duty reserve tax (SDRT). While registered pension schemes are generally exempt from income tax, CGT and inheritance tax, they are likely to incur one or more of SDLT, LBTT or SDRT on their investment dealings unless their investments are held wholly within a unit-linked life policy.
By January 31, 2018 (or January 31, in any later year after they were first liable for any of the above taxes), the trustees of a taxable relevant trust must give HMRC a range of information about the trust and its beneficiaries.
HMRC originally required a taxable relevant trust that had incurred a liability in 2016/17 for income tax or CGT (and was not previously registered for self-assessment) to register with the TRS by October 5, 2017 in line with normal self-assessment rules. However, the newsletter confirms this deadline has been extended to December 5, 2017 in the TRS's initial year of operation, by which date the trustees must also provide the required beneficial ownership information. For a taxable relevant trust that has incurred a liability in 2016/17 for any of SDLT, LBTT or SDRT, the registration and provision-of-information deadline remains January 31, 2018.
- Trust registered for self-assessment - if the trust is registered already for income tax or CGT under self-assessment (SA) and the trustees of the trust have incurred a UK tax liability then registration must be completed by no later than January 31, after the end of each tax year;
- Trust not registered for SA - if the trust is not registered under SA and has incurred either an income tax or CGT liability for the first time then registration must be completed by no later than December 5, after the end of each tax year; and
- Trust not registered for SA - if the trust is not registered under SA and has not incurred either an income tax or CGT liability but has incurred either an inheritance tax, SDLT, SDRT, or a LBTT liability then registration must be completed by no later than January 31, after the end of each tax year.
Separately, the newsletter confirms HMRC has published two new forms to help trustees and pension scheme administrators meet their information obligations regarding taxable lump-sum death benefits paid to trusts.
View the Newsletter.