Trusts must register their beneficial owners
New regulations impose on trustees an obligation to maintain a register of beneficial owners and to report additional information to HM Revenue & Customs (HMRC) where they have a UK tax liability.
From 26 June 2017, the Money Laundering Regulations 2017 (MLR 2017) require UK resident trusts, and non-UK resident trusts which are liable to UK tax, to maintain a register of beneficial owners and provide HMRC with specified information in relation to every UK tax year in which they are liable to pay UK tax.
Such registers are not open to public inspection, but trustees must, on request, provide information about the beneficial owners of their trust to the law enforcement agencies specified in MLR 2017. These agencies include HMRC, the Financial Conduct Authority, the National Crime Agency, the police and the Serious Fraud Office.
The following are regarded as beneficial owners in relation to a trust:
- Named beneficiaries
- Any individual who has control over a trust – which is the power to add or remove beneficiaries, appoint or remove trustees, or veto trust distributions
- Potential beneficiaries named in a letter of wishes or similar document
The following information must be recorded and kept up-to-date for every beneficial owner:
- Full name and date of birth
- National Insurance number or unique tax reference (UTR), or usual residential address if the individual does not have a UTR or
- National Insurance number
- Nature of the individual’s relationship to the trust – eg settlor, named beneficiary, trustee
If a trust has a class of beneficiaries, not all of whom have been determined, the register should include a description of the class of persons who are entitled to benefit from the trust, rather than individual names and addresses.
The information for the register must be input directly onto the HMRC portal. The portal for trustees is active, but agents could not access the system until late October.
Further requirement when a trust has a UK tax liability
In any tax year in which the trustees are liable to pay UK tax, HMRC must be provided with the following:
- Full name
- Date it was established
- Description of trust assets and the value of each category of assets at the time HMRC was first notified of the trust
- The address of any property assets
- Where the trust is treated as tax resident and where it is administered
- Contact address for the trustees
UK tax includes income tax, capital gains tax, inheritance tax, Stamp Duty Land Tax, Land & Buildings Transaction Tax and Stamp Duty Reserve Tax payable by the trustees in relation to assets or income of the trust.
Trustees are required to provide this information by 31 January 2018 or 31 January after the tax year in which they are liable to first pay any of the taxes referred to above. However, new trusts which have to file a tax return annually will have a deadline of 5 October after the end of the tax year to register the trust (but for 2016-17 tax returns, the deadline has been extended to 5 December 2017).
The failure by trustees to provide HMRC with the required information will be a criminal offence punishable by imprisonment for up to two years or a fine (or both).
Trustees should be aware that these new obligations do require a large amount of work to be undertaken. We are recommending that the information is gathered early, before the rush starts in January.
The trust register is another weapon in HMRC’s armoury for hunting down people it perceives as not paying their tax. Trustees will need to be scrupulous in their record keeping.
JM Finn is not able to give individual advice of this nature. Clients who wish to explore the points that this article refers to should seek advice from a specialist in relation to their own personal circumstances.