In its response1 to a Government consultation, the ATT welcomes confirmation in the consultation document that jointly held property and some insurance policies will be out of scope of the expansion of the UK register of trusts. But the ATT is concerned that other provisions remain too wide and will place unreasonable burdens on trustees.
Under current anti-money laundering regulations, the UK maintains a register of trusts which pay certain UK taxes. The register contains details of the key individuals involved in each reported trust, and includes details of those who set up a trust, those who run a trust and those who may benefit from a trust.
But by 10 March 2022, the UK is required to implement an EU Directive which will require all UK trusts2 to register on the UK register of trusts - regardless of whether they have UK tax liabilities - unless they fall within certain narrowly defined exclusions. This is a challenge for the UK because trusts can arise in many day-to-day financial arrangements – and the new rules could increase the number of registrations from around 200,000 existing registrations into the millions.
HMRC and the Treasury are consulting jointly on which trusts can be considered to be outside the scope of the EU Directive to register – either because they are at low risk for money laundering or because information about the trust is held elsewhere.
Jeremy Coker, President of the ATT, said:
“We welcome the confirmation that joint held property will be outside the scope of registration. All jointly held property is effectively considered to be held in trust under UK law and without this exclusion anyone owning a home jointly with a spouse, partner or friend could have been required to register their ownership details on the Trust Register, as well as on the Land Register. This would have been a horrendous and easy to overlook burden on homeowners.
“We are pleased to see that insurance policies which pay out on the death or terminal illness of the insured and which have been placed in a trust will be out of scope. Many people with such policies may not appreciate that these policies are held in trust in the first place. Registration would have been exceedingly difficult to enforce.
“The rules still leave a lot of trusts potentially in scope, including family trusts which may have no liquid assets or are effectively dormant, trusts with very small asset values and insurance policies which do not meet the exclusion conditions. We think that more of these trusts should be excluded for the sake of simplicity and proportionality.”
When the legislation has been finalised, the next concern is how to inform all those potentially affected.
Jeremy Coker continued:
“Communicating these changes is going to be very challenging as trusts can easily be overlooked or forgotten until, say, a death or a property sale. HMRC must publish clear guidance which sets out which situations are intended to be in scope and what will be out of scope. Such guidance will be essential for trustees who cannot access funds from the trust in order to pay for advice.”
Notes for editors
- The ATT’s response to the technical consultation on the Fifth Money Laundering Directive and Trust Registration Service can be found here.
- The technical requirements are for all UK express trusts and some non-EU resident express trusts to be registered on the UK Trust Register. An express trust is broadly one which has arisen under the clear intention of the settlor – for example a trust created by a will or in life, so excludes certain trusts that arise automatically by operation of law.
- The objective of 5MLD is to ensure that the UK’s anti-money laundering and counter terrorist financing regime is up-to-date, effective and proportionate by increasing transparency in a number of different areas, including trusts. The UK is implementing 5MLD as EU members were required to transpose the provisions into their national law by 10 January 2020 which was before the UK left the EU.