Treasury and HMRC are consulting on the technical measures needed to extend the Trust Registration Service. The consultation includes draft legislation and proposals on the types of express trusts that will need to register, and provisions on data collection and sharing, and penalties.
Key elements of the consultation focus on:
- express trusts: Treasury notes that many trusts are created through the intention of the settlor, so are express trusts, but that many trusts are implied by law and in such cases beneficial owners may not know that a trust exists. Occasionally trusts also arise because of statute. The UK will expand the current TRS to cover what FATF considers to be express trusts – that is, those clearly created by the settlor – and will catch all UK express trusts and some non-EU resident ones (essentially where a trust is not required to register elsewhere in the EU but enters into a business relationship with an MLR “obliged entity” in the UK or acquires UK real estate). The Government plans to exercise its prerogative to keep outside scope trusts whose purpose and structure mean that payments to beneficiaries are predetermined and highly controlled, or where they are already supervised by HMRC or another regulator.
- out of scope trusts: in principle, none of the following will need to register:
- statutory trusts,
- joint ownership trusts that exist solely for the purpose of owning a home with a partner, relation or friend,
- situations where two or more people co-own an asset with concurrent and not successive interests (like a bank account),
- express trusts established in a form not mandated by legislation but in order to meet its conditions (such as approved share-option and profit-sharing schemes),
- trusts which consist purely of a pure protection policy which does not pay out until death or terminal illness of the insured,
- registered pension schemes held in trust,
- charitable trusts (whether registered or not), or
- trusts already registered in another EU Member State.
Other property-owning trusts will be required to register. The Government will keep under review bare trusts.
- information requirements: trusts currently registered will need to provide some additional information, while newly registered trusts will need to provide all relevant information. If a newly registered trust has no liability to tax, only information about the beneficial owners will be required.
- timeline: Trusts in existence at 10 March 2020 must register by 10 March 2022; those set up after 10 March 2020 must register on the later of 30 days after establishment or 10 March 2022; and trusts set up on or after 10 March 2022 will have 30 days to register. Trustees will have 30 days from becoming aware of any changes to update the register. Until 10 March 2022, trusts that incur a tax liability for the first time should register under the current process,
- penalties: for failing to register, trustees will be sent a “nudge” letter but there will be no financial penalty. Fro a first failure to update details within the time limit, there will again only be a “nudge” letter, but for subsequent offences there will be a penalty of £100 per offence. But there may be financial penalties for trustees found to have deliberately failed to register or update.
- data sharing: information will be given out only following a legitimate request, and, where the request is justified, information should be provided in a standardised format. Treasury also proposes to allow access in respect of third country entities where a trust holds a controlling interest in a non-EEA legal entity. Where information is provided, it will be on the name, month and year of birth, country of residence and nationality of the beneficial owner and the nature and extent of the beneficial interest held. Where the beneficial owner is a legal entity, the information will be its name, registered or principal office and nature of its role in relation to the trust.
- proof of registration: The government proposes that the onus will be on the trustee to provide proof of registration and an excerpt from the register to MLD5 “obliged entities” that request it.
The draft legislation would amend the MLRs.
Consultation closes on 21 February.