HMRC has published a summary of the responses it received to its consultation on MLD5 and the Trust Registration Service. The consultation had over 100 responses, and the key messages were:
- most respondents agreed with the list of trusts that had been proposed as “out of scope”, but also gave examples of further trusts that should be excluded even though often described as “express”. This included:
- bare trusts (on the basis there is no substantial difference between a bare trust and the individual owning assets directly)
- trusts used to support commercial transactions (which are usually short-term bare trusts)
- insurance trusts for group and critical illness/healthcare policies as well as life policies
- pilot and de minimis trusts
- will trusts
- employee ownership trusts and similar structures
- charitable trusts that follow the relevant guidance but are not regulated elsewhere because of charity registration requirements
- pension trusts (respondents noted some pension trusts were not included in the proposals) and
- some respondents wanted limits set, and clarification on the “business relationship” duration requirements that would bring non-EEA trusts within the registration requirement – while others said that it the only connection to the UK was through a service provider no registration should be required;
The Government considered the responses, and has finalised its list of trusts that will be exempt, as:
- Trusts imposed by statute, where these do not result from the clear intention of the settlor. For example, the statutory trust arising on intestacy
- UK registered pension trusts
- Charitable trusts regulated in the UK
- Pure protection life insurance policies and those paying out on critical illness or disablement, including group policies
- Trusts used by government and other UK public authorities
- Trusts for vulnerable beneficiaries or bereaved minors
- Personal injury trusts
- Save as you earn schemes and share incentive plans
- Maintenance fund trusts
- Certain trusts incidental to commercial transactions
- Certain trusts used as part of financial markets infrastructure
- Authorised unit trusts
- Co-ownership trusts, where the trustees and beneficiaries are the same persons
- Will trusts created on death that only receive assets from the estate and trusts that only receive death benefits from a life insurance policy and are wound up within 2 years of death
- Existing trusts holding assets valued at less than £100 unless or until further assets are added
It has also clarified “business relationship” as meaning a relationship arising out of the professional activities of the obliged entity and is expected to last for at least 12 months, and will also require non-UK trusts to register only if the trust has at least one UK resident trustee. Any non-UK trust that acquires land or property in the UK will be required to register in line with the Registration of Overseas Entities Bill, but will not be subject to data sharing provisions unless they also meet one of the other required categories.
There will be significant further guidance, but in principle, the government thinks the 10 March 2022 registration deadline should be feasible, and that the 30 day deadline for new registrations should also work. It will proceed with its planned penalty regime for failure to register and consider what additional action might be appropriate where failure to meet requirements is deliberate.
The Money Laundering and Terrorist Financing (Amendment)(EU Exit) Regulations 2020 have now been laid before Parliament, with a “sift end date” of 8 September. The Regulations are made under both the European Communities Act and the EU (Withdrawal) Act.