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What Every Trustee Should Know About The Fifth Anti-Money Laundering Directive In 3 Minutes

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What Every Trustee Should Know About 5MLD In 3 Minutes

5MLD is here. Unfortunately (or fortunately, depending on your viewpoint) this is not another Simon Cowell thrown together Boy Band destined to conquer teenage hearts and the Charts. It is the Fifth Money Laundering Directive and has been largely incorporated into the snappily titled Money Laundering and Terrorist Financing (Information on the Payer) Regulations 2017 (MLTF(IP)R 2017 for short?).

However, the 5MLD changes for the reporting of trusts have not yet been implemented into legislation. This is so further discussion can be had over the Government's proposals. HMRC's technical consultation document can be found here and includes draft legislation.

What trusts need to register?

The current 4MLD rules mean that trusts need to register with HMRC on the Trust Registration Service (TRS) only when there is a taxable event. With the proposed 5MLD rules all UK express trusts and some non-EU trusts, that are not considered as out of scope, will need to be registered. An express trust is one which is created through the intention of the settlor.

What trusts are out of scope?

The out of scope trusts include statutory trusts, such as those created by the intestacy rules; joint ownership trust of land that exist solely for the purpose of jointly owning land with someone; most bare trusts; charitable trusts; registered pension schemes held in trust; and a few other specifically included as out of scope.

The changes mean that for example, a discretionary trust holding a charge against a property or a life interest trust that has half the family home in it following the death of one spouse will need to be registered even though there is no taxable event.

When do I need to register?

If you are a trustee you need to be aware of your responsibilities and the deadlines for making sure your trust is registered. The proposed deadlines are:

  • Trusts in existence by 10 March 2020 must register by 10 March 2022,
  • Trusts set up after 10 March 2020 must register by the later of 30 days after creation or 10 March 2022, and
  • Trusts created after 10 March 2022 will have 30 days to register.

In addition to the registration deadlines, trustees will have 30 days to update the register with any changes.

There will be penalties for trusts that do not comply with the new legislation and it is unlikely that HMRC will accept ignorance of the law as an excuse.

What information will I need to report?

The information needed for registration under 5MLD is more detailed to that which is already required under 4MLD and trustees will need to update the system if they are already registered. Unfortunately this isn't possible yet as the TRS system doesn't have amendment capability.

The day before the Budget 2020 is most prevalent in the deadlines and it will be interesting to see if the Chancellor makes any changes to trusts outside of the registration requirements.

The consultation runs until 21 February 2020 so you have just less than 3 weeks to get your views to HMRC.

If you would like further information about the proposed changes or the current registration requirements, please contact Marc Dorsett on 01245 228146 or dorsettm@live.co.uk.

This is not legal advice; it is intended to provide information of general interest about current legal issues.