Non-compliance with the new Beneficial Trust Register may lead to fines and prosecution, warns accounting, tax and advisory practice Blick Rothenberg.
Rebecca Goldring, Manager at Blick Rothenberg, says: “In the last few years we have been flooded with legislation and directives imposing reporting obligations on Trustees. There was the Foreign Account Tax Compliance Act (FATCA), followed by the Common Reporting Standard, and now we find ourselves in the midst of the Beneficial Trust Register, which appears unbelievably onerous and a big brother attempt.
“Trustees are now required to report not only beneficiaries with an absolute interest in trust assets, but those with a discretionary interest – a mere hope of benefitting. This could therefore include those identified in letters or memorandum of wishes or similar documentation.
“This is just another example of how increasingly complicated our tax system is becoming. Instead of simplifying procedures, we are adding layers and layers of information and legislation that make compliance not only burdensome but also costly.”
The Beneficial Trust Register was introduced by the EU’s Fourth Money Laundering Directive, which was implemented into UK law on 26 June 2017, it is a register to be held by HMRC containing information pertaining to trusts, their assets, and their beneficiaries.
Unlike the People with Significant Control beneficial ownership register for companies, the trust register will not be open to the public. It will only be available to law enforcement bodies and the UK Financial Intelligence Unit.
The directive imposes obligations on trustees to report a ‘taxable relevant trust’ which is defined as a trust where the trustees are liable to pay either Income Tax, Capital Gains Tax, Inheritance Tax, Stamp Duty Land Tax, Land and Buildings Transaction Tax or Stamp Duty Reserve Tax to HMRC.
Both a UK trust and a non-UK trust, which receives income from a UK source or has assets in the UK that are liable to pay tax, will have to report.
Goldring says: “Some of the required information is to be expected; for example the full name of the trust, a statement specifying the assets and their value, the date of commencement, details of trust advisers to include those providing legal, financial, or tax advice; and the place where the trust is administered. This information is arguably no more onerous than that required by the old style paper form 41G.
“It is when you start to look at the information that is required for the settlor, trustees, and beneficiaries that the reporting criteria appear unbelievably burdensome.”
The information trustees are responsible for reporting to HMRC for the settlor and the beneficiaries includes their full name, correspondence address and other contact details, date of birth, National Insurance number or UTR for tax purposes for UK residents, and passport details for non-UK residents.
Personal representatives of complex estates of deceased individuals also need to register with HMRC using the new online system and provide the above information of the deceased and personal representatives.
Where a beneficial owner is a company, the information required includes the corporate or firm name, registered or principal office, legal form and applicable governing law, company registration details, UTR and the nature of the entity’s role in relation to the trust.
For trusts established prior to 6 April 2016, the above information has to be submitted to HMRC on or before 31 January 2018, or 31 January after the tax year in which the trustees are first liable to pay UK tax. Trusts first liable in 2016/17 have to register by 5 December 2017.
Goldring says: “The new requirements are onerous and wide-reaching. Trustees are urged to check that all beneficial owners and potential beneficiaries have been identified, obtain any missing information and keep this stored on a central system. They must also keep HMRC updated of any changes.
“It is important to pay attention to this now and be ahead of the game as non-compliance may lead to fines and/or prosecution.”