The last couple of years could be seen as the 'beginning of the end' for structures protecting ownership information from the wider world. The amount of compliance and due diligence which trustees must comply with has grown greatly in recent years. This article sets out the more recent compliance obligations (both in force and in the pipeline) which trustees must be aware of.
Common Reporting Standard (CRS) – HMRC
The CRS applies to all UK trusts and was introduced in the UK with effect from 1 January 2016. Trustees have to identify the settlor, beneficiaries and persons exercising ultimate effective control over their trusts and ascertain their tax residency and make the appropriate reporting to HMRC. The filing deadline is 31 May for the previous calendar year.
Is the information publicly available?
Reported information is not publicly available but is shared with other countries connected with the structure under automatic exchange of information agreements.
Persons with Significant Control (PSC) – Companies House
If a trust holds over 25% of the shares in an underlying UK company then the trustees will need to provide information so the company can make the appropriate reporting under the PSC register. This was introduced in 2016 as part of the UK's efforts to improve transparency and prevent money laundering.
Anyone who exercises significant control over the company will need to be reported and for trusts this is likely to include the trustees and some or all of the beneficiaries and settlor depending on their level of involvement in the trust and/or company.
Is the information publicly available?
The PSC register is publicly available at Companies House and is included in every UK company's annual confirmation statement (which replaced annual returns from 30 June 2016).
The Trusts Register – HMRC
New legislation which came into force from 26 June 2017, and implemented the 4th Anti-Money Laundering Directive, requires all UK trusts and certain non-UK trusts to register information with HMRC on a Trusts Register.
The information to be reported is extensive including details about the trust, its asset, the name of any paid legal, financial or tax advisers and the identity of the settlor, trustees, beneficiaries (including any potential beneficiaries) and any persons exercising effective control over the trust (e.g. protectors).
Reporting needs to be made by 31 January after each tax year in which the trustees were liable to pay certain UK taxes.
Is the information publicly available?
At the moment the reported information will not be publicly available but will be accessible by law enforcement bodies including HMRC, police forces and the NCA. However, there are concerns that this may be the first step towards a public trust register. There certainly appears to be an appetite for this on the continent and the 5th Anti-Money Laundering Directive, which is currently being considered in Brussels, includes proposals to make the trusts register public. Undoubtedly (notwithstanding Brexit) the UK government is likely to come under pressure to meet similar standards if this proposal comes into force in the EU.
4th Anti-Money Laundering Directive (4th AMLD)
As well as creating the Trusts Register the legislation implementing the 4th AMLD also imposes reliance and record-keeping requirements on trustees.
Trustees must maintain accurate and up-to date records of all beneficial owners and potential beneficiaries and on request must share this information with certain persons such as banks, lawyers, accountants and estate agents that they form business relationships with.
Trustees must also notify these persons within fourteen days of any changes which take place during the business relationship.
The Proposed Beneficial Ownership Register – Companies House and the Land Registry
In the future it seems likely that overseas entities will have to provide details of their beneficial ownership on a public register at Companies House in order to acquire or dispose of UK real estate. This is part of the government's ongoing efforts against money laundering and seeks to ensure that overseas entities holding UK real estate are subject to the same transparency requirements as UK companies.
The proposals were released in a consultation document in April 2017 and responses to the consultation are currently being reviewed. However, the proposals published were in a near complete form and so the expectation is that it is a case of 'when' rather than 'if' these proposals come into force.
Is the information publicly available?
If the proposals are implemented as set out in the consultation document then overseas entities owning UK real estate will need to supply information on their beneficial ownership (in much the same was as under the PSC) to Companies House and the information will be displayed there publicly. They will also be issued with a registration number (unique to the overseas entity) which will be displayed at the Land Registry and allow the public to connect properties to the overseas entity which owns it.