Q&A: trusts and Fifth Money Laundering Directive
15 Oct 2019
In our regular Q&A series from Croner Taxwise, Kiya Jacobs examines potential pitfalls accountants could experience when registering trusts to comply with the Fifth Money Laundering Directive (5MLD)
15 Oct 2019
Q. What is the Fifth EU Money Laundering Directive and how will it impact my clients?
A. The Fifth EU Money Laundering Directive (5MLD) is to be implemented into UK law by January 2020. Although the UK has committed to leaving the EU, it still intends to implement the directive.
The Fourth EU Money Laundering Directive (4MLD) was the reason that HMRC introduced the Trust Registration Service, which broadly requires all trusts with tax liabilities to register with HMRC.
The new Directive will bring into its scope all UK express trusts, not just those with UK tax implications. It will also apply to non-EU resident trusts which own UK land or property, or which have a “business relationship” with an entity in the UK such as solicitors, accountants or banks.
The term ‘express trust’ means a trust that was expressly/deliberately created by a settlor as opposed to being set up through a court order. The onus will be on the trustees and their agents to determine whether the trust is an express trust or not. The government has issued examples of the categories of UK trusts likely to have to register to include discretionary trusts, interest in possession trusts, many types of bare trusts, charitable trusts and employee ownership trusts.
Public access to the trust register will be available to anyone who has a legitimate interest. There is no de minimis threshold or exemption provided.
For unregistered trusts already in existence on 10 March 2020 the government has proposed a deadline for registration of 31 March 2021. For trusts created on or after 1 April 2020 the government is proposing that the trust should be registered within 30 days of its creation and this 30 day deadline is also to be used for any amendments to be made to the TRS data once the availability to do so is there.
The practical difficulty for agents will be in helping their clients identify the trusts they are involved in that the trustees will have to register for the first time. For example, life policies written in trust, trusts owning a single property where the beneficiary lives, etc. Many clients will not have advised their agent of their interest in such trusts if no tax liabilities have previously arisen.
More detailed guidance can be found here.
About the author
Kiya Jacobs is a Tax Advice Consultant at Croner Taxwise, tel: 0844 892 2470