UK proposals for a register of trust ownership

The UK government is proposing to introduce a new trust register from 26 June 2017 to comply with its obligations under the Fourth Anti-Money Laundering Directive (4AMLD). It will apply to both UK trusts and to non-UK trusts with UK tax liabilities.

The register will be maintained by HM Revenue & Customs (HMRC) and, under current proposals, set out in draft regulations published in March 2017, will only be accessible by tax and law enforcement authorities. However, the European Commission is proposing that the 4AMLD should be amended to require trust registers to be publicly available. If the 4AMLD is amended before the UK leaves the EU, the UK would have to amend its regulations.

The regulations introducing the new regime are currently in draft, but we expect to see the final regulations soon after the general election as the 4AMLD requires the UK to introduce the regime by 26 June 2017. The regulations may change in response to comments made in the consultation process.

Affected trusts

The new registration requirements will apply to all UK express trusts and to non-UK trusts which receive income from a source in the UK or have assets in the UK on which they are liable to pay income tax, capital gains tax, inheritance tax, stamp duty land tax or stamp duty reserve tax. This will exclude most bare trusts.

An express trust is a trust that was deliberately created by a settlor expressly transferring property to a trustee for a valid purpose, rather than a statutory, resulting or constructive trust. Contracts, wills and testaments will only be registrable if they create an express trust which generates a UK tax consequence. Investment trusts will not be covered as they do not involve a transfer of legal ownership of property from the settlor to the trustee.

A trust will be regarded as a UK trust if:

• all the trustees are established in the UK, or
• at least one trustee is established in the UK and the settlor was established in the UK at the time when the trust was set up, or when funds were added to the trust.

The register

The registration service will be called the Trusts Registration Service and will be an online service operated by HMRC.

The new online service will replace the previous requirement to file a paper form notifying HMRC of the creation of a trust in order for income tax or capital gains tax to be paid. The paper form was withdrawn from April 2017. However, the new registration service will require more information about the trust and its beneficiaries than HMRC obtained under the old notification system.

Trustees will be required to provide information on the identities of the settlors, other trustees, beneficiaries, all other natural or legal persons exercising effective control over the trust, and all other persons identified in a document or instrument relating to the trust, including a letter or memorandum of wishes. The draft regulations provide that details to be supplied about individuals include name and address and if that address is not in the United Kingdom, the individual’s passport number or identification card number, the individual’s date of birth and the individual’s national insurance number and unique taxpayer reference, if any.

If a trust has a class of beneficiaries, not all of whom have been determined, then trustees will simply need to provide a description of the class of persons who are entitled to benefit from the trust, rather than individual names and addresses.

Trustees will also be required to provide general information on the nature of the trust. In the draft regulations these include its name, the date on which it was established, a statement of accounts describing the assets identifying the value of each category of the trust assets (including the address of any property held by the trust), the country where it is resident for tax purposes, the place where it is administered and a contact address. Trustees will also need to provide the name of any advisers who are being paid to provide legal, financial, tax or other advice to the trustees.

First deadlines

For trusts which already exist, the first filing deadline will be on or before 5 April 2018.  For new trusts the first filing deadline will be the end of the tax year in which the trustees first become liable to pay UK taxes.

There will be an annual requirement before 6 April each year to notify any changes or to confirm that there have been no changes.  

The regulations setting up the register need to be in force by 26 June 2017 to comply with the 4AMLD. However, the general election means that we will probably not see the final form of the regulations until after 8 June.

Who can access the information?

The current draft regulations only allow HMRC and law enforcement bodies to access the information on the register. However, since the 4AMLD was agreed in May 2015, various EU committees have proposed amendments to the directive to allow full public access to registers of trust beneficial ownership. If the EU agrees to the changes, whilst the UK is still bound by EU directives, the UK regulations would need to be amended.

Other obligations of trustees

In order to comply with their obligations, the trustees of all affected trusts will need to maintain accurate and up-to-date records of all the beneficial owners of the trust.

Trustees entering into certain business transactions in their capacity as trustees will have to disclose that they are acting as trustees and on request provide information about the beneficial owners of the trust. The transactions affected will be with those who are required to perform customer due diligence such as financial institutions, accountants, law firms, trust or company service providers and estate agents.

Trustees must also provide information about the beneficial owners of the trust if they are requested to do so by any law enforcement authority.

Professional trustees must keep records for a period of five years after the date on which the final distribution is made under the trust.

Other developments

Since 6 April 2016, most UK companies have been required to formally identify and keep a register of the individuals who are ‘persons with significant control’ (PSC) over them and to include this information in an annual return. The information on PSCs is available for public inspection. The PSC register makes it possible to trace the true owners of UK properties, where a UK company is listed at the Land Registry as the owner of the property. However, this is not currently possible where the property is owned by an offshore company.

In order to introduce transparency of ownership of UK property by non-UK companies, the government intends to introduce a new publicly accessible beneficial ownership register of overseas companies that own UK property or participate in UK government procurement. Details were set out in a consultation document published in April 2017.

Jason Collins and Paul Noble are tax experts at Pinsent Masons, the law firm behind Out-Law.com.