Changes to registration rules will net all trusts

The introduction of blanket disclosure means all UK trusts will have to register details of their ownership on the UK Trust Register from next year resulting in millions of additional registrations

The Association of Taxation Technicians (ATT) is warning that the extension of registration rules will put trustees at risk of civil and criminal sanctions if they fail to comply when the new rules come into force from March 2020. A consultation on the rule changes has now closed and the government is reviewing responses, with final rules expected to be published this autumn.

The EU’s fifth money laundering directive (5MLD) came into force in July 2018 and means that the UK must implement the new rules for trusts by March 2020.

The existing UK Trust Register was created in 2017 following the fourth EU money-laundering directive as a transparency measure. Currently trusts must register details of the settlor(s) (the individual or individuals who created and funded the trust), the trustees (who manage the trust) and the beneficiaries who could potentially benefit from trust assets.

At the time, HMRC estimated that 170,000 trusts would need to register.

The latest directive will significantly expand the scope of the existing register by requiring the trustees of all UK resident trusts to register their trusts on the UK Trust Register, regardless of whether the trust has incurred any UK tax liabilities.

Jon Stride, co-chair of the ATT’s technical steering group, said: ‘While it is impossible to know how many more trusts will need to register under the new rules, the sheer scale of this task must not be underestimated.

‘Many trusts which have been effectively dormant, often for many years, will be brought within scope, including trusts that hold land and property or, very commonly, investments such as life insurance policies.

‘Given the low level of understanding of trusts by the general public, we think that it will be extremely difficult to ensure that all the trusts which will be caught by the new rules are identified and registered.’

ATT points out that trustees who inadvertently breach the regulations by failing to register run the risk of both civil and criminal sanctions.

Even the smallest trusts must comply because there are no carve-outs, exemptions or de minimis thresholds in the rules. Many trusts do not have any liquid cash assets, nor assets that could be easily sold to raise funds, which leaves trustees who need to seek professional advice in the difficult position of having to meet the costs personally.

Stride said: ‘We are calling on the government to provide clear guidance, together with understandable examples, on what arrangements are in and out of scope of the rules to ensure that trustees can understand and comply with their obligations.

‘We urge the government to apply the penalty regime in a proportionate and reasonable manner for any trust that fails to register.

‘It is quite possible that trustees who are not seeking to hide anything could be in breach of the regulations entirely unintentionally if they are unaware of the rules. The objective of any penalty regime should be to educate and encourage trustees to comply and not to levy penalties.’

Pat Sweet

Treasury consultation on transposition of 5MLD

ATT response to trusts consultation

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