Guest Comment: A legal update

Written by Norton Rose Fulbright senior knowledge lawyer Lesley Harrold

The draft Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the New Regulations) are intended to transpose into UK law the EU Fourth Money Laundering Directive by 26 June 2017.

Currently, the Money Laundering Regulations 2007 (the 2007 Regulations) require trust or company service providers to register with HMRC if they are not authorised by the FCA (or certain other specified professional bodies) and where they are in the business of offering services as a trustee or director of a trustee company.

The New Regulations define trust or company service providers in the same way as the 2007 Regulations, and will thus registration will continue to apply to those acting as trustees by way of a business. However, HMRC’s current guidance classifies occupational pension schemes as low risk trusts, meaning professional trustees of those schemes are not required to register with HMRC.

Under regulations 41-44 of the New Regulations, trustees of “relevant taxable trusts” (whether or not they are trust or company service providers) must keep adequate, accurate and up-to-date information on the beneficial ownership of their trust, and must also make this information available to law enforcement agencies and the UK Financial Intelligence Unit.

The extent of the work required by trustees and administrators will depend on whether HMRC modifies the definition of “beneficiary” for schemes, although there is currently no indication that it intends to do so. The regulations as currently drafted would require trustees to keep accurate data on trustees, employers, other persons who exercise control over the plan and all identifiable beneficiaries – active members, pensioners, and deferred members. Where there is a class of beneficiaries not all of whom have been determined (e.g. potential recipients of survivors’ benefits) then trustees need only maintain a description of the class.

Data to be recorded includes the name, address, date of birth, NI number and unique taxpayer reference (if any) of all “beneficial owners” of the trust. Where the individual has no UK address, passport details must be obtained. The information will need to be provided to HMRC annually and also any changes notified, with the first deadline being 6 April 2018 (or the end of the tax year in which they first become liable to pay income tax, CGT, inheritance tax, stamp duty land tax or stamp duty reserve tax).

Although the New Regulations are not yet available in final form, they do not currently include an exemption for pension scheme trustees from these requirements. Neither has HMRC indicated that any guidance it publishes will provide exemptions for occupational pension schemes. It therefore seems likely that trustees will have greater record-keeping and reporting obligations under the new legislation, which may mean administration costs could increase.

Failure to comply with the New Regulations will be a criminal offence, potentially resulting in a fine and/or up to two years’ imprisonment.

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