Trustees who are subject to these rules need to ensure they have all the required information on every beneficial owner and that it is accurate and up-to-date. Trustees should ensure that the trust and any letter of wishes reflect the true position and are not out-of-date, as obtaining the necessary information could result in individuals becoming aware of a trust which they previously did not know existed (and didn’t know there were potential beneficiaries of).
- All UK resident trusts are subject to these requirements.
- Non-UK resident trusts which hold UK assets directly will be subject to these obligations (regardless of the domicile status of the settlor).
- Non-UK resident trusts which hold UK assets indirectly through a non-UK registered company should not be subject to the new rules.
- The ‘beneficial owner’ register will include information on the trustees, settlor and named beneficiaries, as well as people who have certain powers in relation to the trust and potential beneficiaries named in a letter of wishes.
- Trustees who are subject to these obligations and fail to comply could be subject to an unlimited fine and naming and shaming provisions, and will also be guilty of a criminal offence, punishable by imprisonment for up to 2 years.
Who must the trustees keep details of?
The following are treated as ‘beneficial owners’, and specified details on them must be kept by the trustees:
- named beneficiaries
- any individual who has ‘control’ over the trust.
The trustees must also keep details of any individual referred to as a potential beneficiary in a letter of wishes or similar document from the settlor.
An individual will be treated as having ‘control’ over the trust if, for example, he has power to add or remove beneficiaries, or appoint or remove trustees, or power to withhold consent to or veto trust distributions, or amendments to the trust.
What information on beneficial owners must the trustees keep a record of?
The following information on every beneficial owner (and any individual referred to as a potential beneficiary in a letter of wishes or similar document) must be recorded and kept up-to-date:
- his full name and date of birth
- his national insurance number or unique taxpayer reference, or if he doesn’t have one his usual residential address. If his usual residential address is not in the UK his passport or identity card number, together with the country of issue and the expiry date must be recorded
- the nature of his relationship to trust - e.g. settlor, named beneficiary.
There is no prescribed format for the beneficial owner register, but it must be in writing.
When and what information must trustees file with HMRC?
In any tax year in which the trustees are liable to pay UK tax they must provide HMRC with the following:
- in relation to the trust:
- the name of the trust and the date it was established
- a description of the trust assets and the value of each category of assets (if the trust holds any property the address of that property must be given)
- where the trust is treated as tax resident and where it is administered
- the name of any advisers being paid to provide legal, financial, or tax advice to the trustees
- in relation to each beneficial owner (and any individual referred to as a potential beneficiary in a letter of wishes or similar document), the information which the trustees are required to keep a record of (see above).
Who will be able to access the information on beneficial owners?
HMRC will maintain a central register of the beneficial ownership information of all trusts which have to file with HMRC. Currently, access to this register will be restricted to law enforcement authorities in the UK, but if proposed amendments to the EU Fourth Money Laundering Directive are agreed and implemented in the UK the register may in future be publicly accessible.
What are the penalties for failing to comply?
If trustees fail to maintain an accurate and up-do-date record of beneficial owners, or provide HMRC with the required information, HMRC can impose a penalty and publish a statement about the failure. The trustees will also be guilty of a criminal offence, punishable by imprisonment for up to 2 years or a fine (or both).
What should settlors and trustees do?
Trustees will need to obtain information on all beneficial owners. This could result in individuals becoming aware of a trust which they previously did not know existed.
A settlor might consider:
- avoiding naming individual beneficiaries other than the principal beneficiaries
- referring to default beneficiaries (who is unlikely will ever actually benefit from the trust) by class rather than by name
- not providing the trustees with a written note of wishes during his lifetime (as his wishes are likely to change over time with changes in the circumstances of the family/potential beneficiaries)
- placing any letter which sets out who he wishes to benefit after his death, or the death of the principal beneficiaries, with his will rather than providing it to the trustees during his lifetime.
Trustees should ensure any letter of wishes they have is up-to-date and does not refer to anyone who it is no longer intended should benefit from the trust.
Further details including which trusts are subject to these obligations and a case study can be found in our full briefing note on the UK register of beneficial ownership of trusts.