5th money laundering directive
We previously reported on trustee reporting obligations in December 2018. Since then there have been further developments which are worthy of note.
The Trust Registration Service (TRS) was launched in 2017 following the implementation of the EU Fourth Money Laundering Directive. Since then, the EU have introduced the EU Fifth Money Laundering Directive (5MLD) which, in spite of leaving the EU, was implemented into UK law from 10 January 2020.
The 5MLD presents changes in respect of which trusts trigger the requirement for trustee registration on the TRS. Previously, this was only if the trustees incurred specified UK tax liabilities for express trusts but the proposal is that certain trusts will require registration even where the trustees have no liability to pay a UK tax. Whilst the 5MLD has been implemented into UK law, the changes to the TRS have not yet been implemented to allow for a further consultation so this is very much a current topic of concern and discussion.
The government held a consultation in April 2019 on the transposition of the 5MLD and a response was issued in January 2020.
Following this, HM Revenue & Customs issued a technical consultation document which was published on 24 January 2020.
If the 5MLD is implemented as expected, the following trusts will require registration in addition to the trusts incurring specified UK taxes:
- All UK resident express trusts (UK resident is defined as being all UK trustees are resident or there is a mixture of UK and non-UK resident trustees with the settlor being UK resident);
- Non EU –resident express trusts that acquire UK land or property either on or after 10 March 2020;
- Non EU – resident express trusts that enter into a new business relationship with an obliged entity on or after 10 March 2020.
The proposal to create a register of all express trusts whether taxable or not is a concern as this could greatly increase the administrative burden on professionals and trustees. The proposal could cover pilot trusts, non-income producing trusts and trusts created as vehicles for standard investment and inheritance tax planning.
The proposed registration deadline for registration of existing express trusts as at 10 March 2020 is by 10 March 2022. The registration of trusts set up on or after 10 March 2020 should take place within 30 days of creation or by 10 March 2022 (whichever is the later). Any trusts created after 10 March 2022 will have 30 days to comply with the deadline.
If a trust appears on the TRS and changes are required to the register, trustees will have 30 days to ensure that records are up to date from the date of change to avoid the possibility of receiving penalties for non-compliance.
Trowers and Hamlins LLP are responding to this consultation to air numerous concerns about the impact of the 5MLD on trustees and their reporting obligations and highlight some issues that arise in legal practice that may not have been considered.
To view our December 2018 trustee obligations report please click here.