New Trust Registration Rules: Are You Ready
From the 10th March 2020, the EU 5th Money Laundering Directive (5MLD) will come into force requiring most UK trusts to register with the Trust Registration Service. Trustees of existing trusts will have a year in which they must make their trust registration, and new trusts established from the 1st April 2020 will have a trust registration deadline of 30 days. Currently, penalties follow a sliding scale from £100 to the greater of £300 or 5% of the tax owed, depending on the lateness of registration.
The Current Trust Registration Rules
Currently trustees only need to register a trust established in writing with ‘tax consequences’. Broadly, this means any trust established which has a tax liability e.g. income tax. These new trust regulations will capture ‘any express trust’, not just those with a tax liability, including many trusts connected to products used in financial planning such as: Bare trusts, Interest in possession and discretionary trusts, discounted gift trusts, loan trusts and trusts of protection policies, including those used in share protection schemes. There are no exceptions or exclusions in the directive on the grounds of trust value or type, and the Society of Trust and Estate Practitioners (STEP) estimate that this could boost the number of trusts registrations 10 fold to two million.
Trust Registration Details to be Provided to the Register
The trust register should be updated with information on the settlors, the trustees and the beneficiaries, including:
* Date of birth
* Country of residence
5MLD will also affect advisers. Under new legislation, they will be required to obtain proof that a trust is on the register before they can give advice for the first time.
Will Brexit avoid the impact of the EU Directive? It appears not as the UK has committed to whatever the outcome of Brexit.
The changes does not alter the fact that trusts continue to offer many benefits to enable the transfer of family wealth, help to protect vulnerable beneficiaries and for individuals to retain control over their gifts. If you are interested in finding out more about trusts and how they could work for you, or have any concerns about an existing Trust, please contact Wingate.