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Extension to Trust Registration Service for 5MLD

Summary of the changes that will be made to the Trust Registration Service under the Fifth Money Laundering Directive.

Background

On 24 January 2020 HM Revenue & Customs (HMRC) and HM Treasury published a technical consultation “Fifth Money Laundering Directive and Trust Registration Service”. The consultation outlined how the government intended to implement changes to the Trust Registration Service (“TRS”) as required by the Fifth Money Laundering Directive. The government sought views and evidence on the extension of TRS including the draft legislation and proposals on the types of trusts that will be required to register, on processes for data collection and sharing, and on penalties.

The government have now provided an update on the responses they received, and published the statutory instrument to enact the extension to the TRS.

Trusts in scope

The trusts that will have a registration obligation on TRS includes the following:

  1. TYPE A UK express trusts other than those that are excluded (see below);
  2. TYPE B Non-UK express trusts (unless excluded) where one or more trustees are UK resident and that:
    a. Hold an interest in UK land, or
    b. Enter into a business relationship with a relevant person (e.g. accountant or lawyer) in the UK. If the trust is already registered on an equivalent EEA register no TRS registration obligation arises.
  3. TYPE C Non-UK express trusts where none of the trustees are UK resident, and the trust acquires an interest in UK land.

Trusts excluded from registration

The following trusts will be excluded from registration:

  • 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 (or not required to register with the Charity Commission under the Charities Act 2011)
  • 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 (e.g. for jointly holding properties)
  • 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 (pilot trusts).

The full detail of trusts that are excluded from registration can be found in Schedule 3A to the Statutory Instrument.

Information to be registered

In relation to individual beneficial owners, and individuals who are named as potential beneficiaries in a document from the settlor (e.g. letter of wishes):

  • Full name
  • Month and year of birth
  • Country of residence
  • Individual’s nationality
  • Nature and extent of their beneficial interest in the trust, unless they are part of a class of beneficiaries who have not yet all been determined. In this case a description of the class of beneficiaries or potential beneficiaries.

In relation to beneficial owners that are legal entities:

  • Corporate or firm name
  • Registered or principal office address
  • Nature of entity’s role in relation to the trust

For TYPE A and TYPE B trusts that have a controlling interest in a third country (non-UK and non-EEA) entity, the following further information must be provided:

  • The third country entity’s corporate or firm name
  • The law under which the entity is governed
  • The registered or principal office address for the entity.

Registration deadlines

Trusts that meet the registration criteria on 9 February 2022 must register on TRS and provide the applicable information by 10 March 2022.

New trusts must register and provide the applicable information within 30 days of the trust being set up and meeting the registration criteria.

Trustees must notify all changes to the information on TRS within 30 days of the change.

Access to information – legitimate interest

Under the new rules, a person who can demonstrate a legitimate interest in the beneficial ownership details of a trust can apply to HMRC for access to the information on TRS. HMRC are likely to charge a fee for these applications and will require the person applying to provide information to support their request.

In deciding whether the person has a legitimate interest in the trust information, HMRC must take into account:

  • Whether the person is involved in an investigation into Money Laundering or Terrorist Financing (‘MLTF’)
  • Whether the person is making a request to further an investigation into a specified suspected instance of MLTF.
  • Whether disclosure would prejudice criminal investigations or proceedings, or other types of investigation under the Proceeds of Crime Act 2002, and other laws.
  • Whether it is reasonable for the person to suspect that the trust is being used for MLTF.

HMRC will not provide the beneficial ownership information under a legitimate interest request if they consider that making the information available would expose the beneficial owner to disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation. No disclosure will be made if the beneficial owner is under 18 or lacks capacity/is incapable due to mental health issues (as defined).

In the event that HMRC refuse to provide information under a legitimate interest request, the person applying can seek a review of the decision not to disclose.

If HMRC decide to make a disclosure under the legitimate interest provisions, they will disclose the information that is held on TRS about each beneficial owner of the trust, as listed above in Information to be registered.

Access to information – trusts with controlling interest in third country entity

There is a separate provision for access to information about a trust if it holds a controlling interest in an entity that is in a ‘third country’. This is EU terminology and means a country that is not in the EEA, so for UK purposes will apply to non-UK and non-EEA jurisdictions.

If a person makes a written request about a TYPE A or TYPE B trust that has a controlling interest in a third country entity, HMRC must disclose the beneficial ownership information on TRS to the person who has requested it.

The person applying for access to the TRS information will not be required to justify their application for information where it relates to a controlling interest in a third country entity. HMRC are only able to refuse disclosure if they consider that by making available the information about the beneficial owner(s) of the trust would expose the beneficial owner to disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation. Disclosure would also be refused if the beneficial owner is under 18 or lacks capacity/is incapable due to mental health issues.

Information that HMRC will disclose

If HMRC conclude that disclosure of TRS information should be made, they will provide the following information to the person who has requested it:

In relation to individual beneficial owners, and individuals who are named as potential beneficiaries in a document from the settlor (e.g. letter of wishes):

  • Full name
  • Month and year of birth
  • Country of residence
  • Individual’s nationality
  • Nature and extent of their beneficial interest in the trust, unless they are part of a class of beneficiaries who have not all been determined. In this case a description of the class of beneficiaries or potential beneficiaries.

In relation to beneficial owners that are legal entities:

  • Corporate or firm name
  • Registered or principal office address
  • Nature of entity’s role in relation to the trust

Government comments and further steps

The government comments that several issues that were raised by stakeholders in response to this consultation relate to guidance. As guidance is developed, the government will seek stakeholder input as required to ensure that the guidance is suitable and meets the requirements of users.

There are some remaining policy issues that the government wishes to continue exploring over the coming months. Engagement and feedback will be sought as required on these topics.