Trust Registration Service extension narrowed
28 July: Fewer trusts will be within the scope of the expansion of the Trust Registration Service (TRS) than originally proposed, but the 30-day deadline for new trust registrations and rules granting third-party access to data remain unchanged.
The government has published the outcome of its consultation on extending the TRS to all express trusts to meet the requirements of the EU Fifth Money Laundering Directive.
In its response to the consultation, ICAEW had highlighted concerns with the wide range of types of trust that would be brought into scope of registration. It also warned that a registration obligation for any non-UK trust which appointed a UK adviser (such as an accountant or lawyer) risked making the UK professional services market unattractive for overseas investors and uncompetitive internationally.
These warnings have been heeded in part, and the list of trusts that will be excluded from TRS registration now includes:
- Will trusts created on death that only receive assets from the estate and are wound up within two years of death.
- Critical illness policies.
- Registered pension schemes.
- Existing pilot trusts holding less than £100.
- Trusts for joint ownership of property.
The government has also confirmed that non-UK trusts entering into a business relationship with a UK adviser will only be required to register on TRS if the trust has one or more UK trustees. ICAEW has welcomed this change to the proposed rules, which avoids gold-plating of the EU requirements.
However, despite concerns raised by ICAEW the government has reaffirmed the 30-day registration deadline from March 2022 . While existing trusts will have until 10 March 2022 to register on TRS, any trust established after 9 February 2022 will only have 30 days to register and provide the necessary information about their beneficial owners. Any changes to the details of the beneficial owners will also have to be reported to TRS within 30 days of the change.
The government’s view is that this is: “sufficient and is comparable with reporting deadlines imposed on companies for reporting details of ‘People with Significant Control’ to Companies House”.
ICAEW remains concerned that a 30-day deadline will be a challenge for many trustees, particularly those who are not involved in trust administration on a day-to-day basis, as would be the case for many family arrangements.
The consultation outcome also confirms that third parties will be able to apply for access to information on TRS as part of the new rules. Under a “legitimate interest” request an applicant can ask HMRC to disclose personal details of the beneficial owners of a trust if this relates to an investigation into money laundering or terrorist financing.
Law enforcement have always had access to such data, but this new gateway will open up private information to journalists and other campaigners. There are proposed safeguards to prevent disclosure where HMRC believe there is a risk to the beneficial owner due to fraud, kidnapping and blackmail, for example, but it remains to be seen how this protection would work in practice.
Even wider access to data will be possible where a trust owns a controlling interest in a non-UK/non-EEA entity, such as a company in the USA. HMRC will be required to disclose personal details of the beneficial owners of such a trust under a “third country” request. No justification will be needed to gain access to this data, although in theory the same safeguards will be in place for those beneficial owners at risk.
The draft legislation for the proposed changes to TRS has been published and is expected to come into force soon. The government acknowledges that some areas will need further guidance to clarify the specific implications for those affected.
ICAEW will continue to engage with HMRC on the development of such guidance, and any further policy issues in this area.
A summary of the new TRS rules can be found on icaew.com/money-laundering.