What are the changes in 5MLD that affect trusts?
However, due to the introduction of 5MLD, there’s going to be a significant increase in the number of trusts that must register going forward. The new rules came into force from 5 August 2020. In addition to the above requirements, trusts with the following connections will also now have to register where at least one of the trustees is a UK resident, and any of the following conditions are met:
- The trust enters into a new business relationship with a UK service provider - service providers include accountants, lawyers, bankers and investment managers.
- The trust acquires UK real estate - this will also apply where all of the trustees are non-residents and isn’t a requirement of 5MLD. Where there are no UK trustees, this information will not be publicly available.
- Nominee/bare trusts where they do not meet specific exemptions - this includes exemptions for commercial activities, or where there’s a normal custody arrangement for portfolio investments. However, where assets are held by parents on behalf of minor children in a bare trust arrangement, the nominee/bare trustee will be required to register.
The main categories of trusts which are exempt from registering include the following:
- Trusts for bereaved minors or vulnerable beneficiaries
- Charitable trusts which are UK regulated
- Pension trusts which are UK registered
- Will trusts created upon death and wound up within two years of death, as long as no assets have been added other than those from the estate. Including trusts that only receive death benefits from a life insurance policy.
- Existing trusts where the value of assets is under £100 (the exemption will no longer apply if assets are added).
- Trusts which are established by statute and aren’t a result from the clear intentions of the settlor.
- Personal injury trusts
Non-UK trusts won’t have to register if all of the trustees are non-UK residents, there’s no UK tax liability and it doesn’t hold assets in the UK directly. These trusts can continue using UK service providers which will be some relief for professional offshore trustees.
HMRC has enabled trustees to register and make any changes to the details in relation to trusts where the trustees were required to register under the 4MLD. The system for registering trusts, which will now be required to register under the 5MLD, was intended to be up and running by spring 2021. However, HMRC has announced that the IT system will not be ready until summer and the original deadline of March 2022 will be extended so that trustees will have approximately 12 months to register from the date of IT delivery. The date has not yet been announced but we will update this article when it is.