UK: UK Trust Register

If you are a trustee of a UK resident trust or of a non-resident trust which has UK assets or UK source income you may need to take action before 5 October 2017.

Background

As part of the fight against money-laundering, organised crime and terrorist financing, the EU's Fourth Anti-Money Laundering Directive ('4MLD') was sanctioned in 2015. It includes provisions designed to increase the transparency of companies, trusts and other structures with a requirement for each EU Member State to keep a register of trusts.

UK Regulations set out to implement the UK register of trusts were published in draft earlier in 2017 and came into force on 26 June 2017. Much of the details has been left unchanged, however, there are a small number of issues which have been changed and/or which require further clarification from HMRC, as set out below.

With penalties for non-compliance to include civil and criminal penalties as well as a fine and up to two years in prison, it is important you understand what is required and by when.

Function of the Register

The Register, which will be operated by HMRC, is to perform two functions, namely providing:

  1. a register of the beneficial ownership of relevant trusts as envisaged by 4MLD; and
  2. the means for trustees to register trusts with HMRC for the purposes of obtaining a Unique Tax Reference Number ('UTR') and delivering tax returns.

As a consequence, in May 2017, HMRC withdrew Form 41G, the paper form which trusts previously had to use in order to register themselves with HMRC for tax reporting purposes. HMRC has now launched a new online portal to replace Form 41G, which allows trustees to register their trusts for both of the purposes listed above (although the service is not yet operational for agents).

Who can access the Register?

At this stage the Register will be private. The Register may, however, be inspected by any "law enforcement authority", which includes HMRC, the Financial Conduct Authority, the National Crime Agency, the various UK police services and the Serious Fraud Office.

The EU's Fifth Anti-Money Laundering Directive, which requires trust registers to be made public, is still being considered in the EU legislative process.

Who has to register and when?

All trusts (whether resident in the UK or not) with UK tax consequences will be required to register. A UK tax consequence will arise if the trust incurs UK liabilities for income tax ('IT'), capital gains tax ('CGT, non-resident CGT, inheritance tax ('IHT'), stamp duty land tax ('SDLT') or stamp duty reserve tax ('SDRT').

Generally, trustees of trusts with UK tax liabilities as mentioned above will be required to provide the necessary information on or before 31 January 2018, but see below for exceptions. Note that registration is required even though the trustees have already submitted a form 41G to HMRC and/or are already paying UK tax. It is not clear whether HMRC intend to notify trustees of this requirement.

While trustees have continuing UK tax liabilities they will be required to notify HMRC of changes to the information contained in the Register (but not changes to asset values) by 31 January after the relevant tax year, or, if there are no changes, to confirm this.

More detail as to registration deadlines

The date by which a trust must register depends on that trust's particular circumstances and, in the case of trusts which become registrable in future, the deadline depends on the taxable event by virtue of which the obligation to register arises.

The table below sets out the potential scenarios and the applicable deadlines for registration in each case: Taxable event Scenario Deadline for registration
IT, CGT Trusts which were: (a) only settled during the 2016/17 UK tax year or which only became liable for income tax or CGT for the first time in that tax year; and which had not previously registered with HMRC using Form 41G 5 October 2017
IT, CGT, IHT, SDLT, and SDRT Trusts which were: (a) liable for relevant UK taxes in the 2016/17 and earlier tax years; and (b) which had already registered with HMRC using Form 41G 31 January 2018
(b)
IT, CGT Trusts which become registrable for reasons of UK income tax or CGT during 2017/18 or subsequent tax years The Regulation suggest 31 January following the end of the UK tax year in which the trust became registrable, but the HMRC registration portal suggests it will be 5 October 2018 (or in the relevant tax year of establishment); this requires clarification

What information must be provided?

  • The trustees will need to provide information on the identities of the following individuals/entities:
  • settlor(s)
  • trustees
  • beneficiaries
  • all other natural or legal persons exercising effective control over the trust, (for example a protector who can veto trustee decisions) and the nature of their control; and
  • all other persons identified as potential beneficiaries in a document or instrument relating to the trust, including a letter or memorandum of wishes.

The information must include the person's name, date of birth, National Insurance Number or UTR (or if none, residential address) and, if they are non-UK resident, their passport or ID number, country of issue and expiry date.

  • If a trust has a class of beneficiaries, not all of whom have been determined, then it will not be necessary to report all of the above information. Instead, trustees will need to provide a description of the class of persons who are entitled to benefit from the trust. The same applies to persons who are referred to as a class in a letter of wishes
  • Trustees will also be required to provide general information on the nature of the trust, namely:
  • its name;
  • the date on which it was established;
  • a statement of accounts describing the assets and the value of each category of assets;
  • the country in which it is tax resident;
  • the place where it is administered;
  • a contact address; and
  • the full name of any advisers who are paid to provide legal, financial or tax advice in relation to the trust.

For what purpose will the information be used?

According to the UK Government, the information will be used to give "law enforcement and compliance officers the tools they need to combat the misuse of trusts". HMRC will also be able to compare the National Insurance Numbers or UTRs of the parties to a trust and factor these into its wide understanding of those persons' tax liabilities.

What are the penalties for non-compliance?

These are not finalised but will include civil and criminal penalties, including a fine and up to two years in prison.

Record keeping

Trustees who are not required to register may nevertheless be obliged to keep up to date written records of the information described above and to disclose it when entering into any transaction on behalf of the trust or when requested to do so by any law enforcement authority. Clarification is required as to whether these requirements apply only to trustees acting in the course of a business.

Some FAQs

  • Does the requirement to register apply to a trustee of a UK resident trust which holds a life insurance policy or a property or other assets which does not generate income or gains?
    There is no requirement to register such a trust unless and until a UK tax liability arises, for example when the property is rented out or sold and generates income or capital gain; in the case of a life policy the paying out of the policy proceeds will not usually trigger a tax event, but investment of the proceeds may give rise to a tax event in the future.
  • We are trustees of a non-resident trust which does not hold any UK assets or have any UK source income, but the settlor is UK resident and pays tax on the income and gains; do we need to register?
    The requirement is for the trustees to have a tax liability so you do not need to register in this circumstance even though the settlor may be able to reclaim the tax from the trustees.
  • We are trustees of a non-resident trust which holds UK assets through a wholly-owned non- UK resident company
    It is thought that this will not in itself result in the trust being registrable, i.e. only taxation at the trust level is relevant. Clarification is being sought from HMRC as to whether this interpretation is accepted.
  • I am a trustee of a charity which is registered with the English Charity Commission? Do I need to register?
    The regulations do not contain any specific exemption for charitable trusts, but as most charities will be exempt from IT, CGT, IHT and SDLT, it is likely that they will not have to register. Further clarification is required though.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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