Almost all trusts – rather than just those with a tax consequence – may need to be registered under new money laundering rules, it has been revealed.
According to the Institute of Chartered Accountants in England and Wales (ICAEW), the Fifth Money Laundering Directive (5MLD) will have a “direct impact” on those who hold trusts, such as financial penalties for non-compliance.
The warning comes after HM Revenue & Customs (HMRC) revealed that the Trust Registration Service (TRS) could be extended to include almost all trusts in a bid to counter money laundering.
Under the new proposals, trusts in existence as of 10 March 2020 would need to register by 10 March 2022, while those set up after 10 March 2020 must do so within 30 days or also by 10 March 2022 – whichever is later.
Failure to follow the rules, meanwhile, could attract financial penalties, increasing in severity over time.
While almost all trusts will come under the scope of the proposed rules, HMRC said trusts could be exempt from registration “where their purposes and structure mean payments to beneficiaries are predetermined and highly controlled” or supervised by HMRC or other recognised regulatory bodies.
The ICAEW suggests that this could include trusts used for “jointly owning a home with a partner or friend and trusts to hold life insurance or retirement death benefits”, as well as “most registered pension schemes and charitable trusts”.
Commenting on the proposals, HMRC said: “The government is now holding a detailed technical consultation on extending the Trust Registration Service to include the draft legislation and proposals on the types of express trusts that will be required to register, data collection and sharing, and penalties.
“The government is keen to ensure that the UK’s anti-money laundering and counter-terrorist financing regime effectively deter such activity while remaining proportionate.”
For more information about the proposed measures, please click here.
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