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17 October 2017

Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

The Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017. These new regulations introduce additional requirements for trustees of a “relevant trust”. This will include most UK occupational pension schemes. Failure to comply can result in civil penalties or criminal liability [individually?]

A relevant trust is an express trust where all trustees are resident in the UK or at least one trustee was resident in the UK and the “settlor” was resident and domiciled in the UK at the time the trust was established or the settlor added funds to the trust. The settlor is the employer who established the pension scheme trust.

Requirement to maintain records  

Trustees must maintain accurate and up-to-date written records of all beneficial owners of the trust (i.e. members and the spouses and dependents of pension scheme members). Trustees only need to keep records of beneficiaries who have been nominated by a member or those known to the trustees and importantly will only have to provide a description of the class of beneficiary where the number of beneficiaries exceeds ten rather than list each one.

Requirement to disclose information on a relevant transaction

When a trustee enters into a ‘relevant transaction’ with a ‘relevant person’ on behalf of the trust, the trustee must inform that person the trustee is acting in his capacity as a trustee and, on request, provide details of the beneficial owners (or class of beneficiaries where more than ten) of the trust. A change of beneficial owners (and the date it occurred) must be notified to the relevant person within 14 days from the date on which any of the trustees became aware of the change.

A relevant person includes banks and investment managers, auditors, solicitors, estate agents and others. A relevant transaction is broadly establishing a business relationship, certain transfers of funds in excess of 1,000 euros and situations where the relevant person suspects money laundering or terrorist financing. So, if the Trustees appoint a new auditor to audit the scheme accounts, this obligation will apply.

Requirement to disclose information to HMRC  

If a relevant trust becomes liable to taxes during a tax year then it becomes a “taxable relevant trust” and must register with HMRC’s trust register and provide HMRC with information about the trust. Registered trust based UK pension schemes are exempt from income tax, CGT and inheritance tax but it is possible that stamp duty land tax (or land and buildings transaction tax in Scotland) or stamp duty reserve tax will arise on investment dealings on assets held in the trust. A liability to pay tax in relation to the annual or lifetime allowance or other benefits does not trigger the duty to register.   The information that must be provided includes: details of the tax residency of the trust and where it is administered, contact address for the trustees, the full name of advisers providing legal, financial or tax advice, details of the beneficial owners (or class of beneficiaries where there are more than ten) and details of the settlor of the pension scheme. This should be the original establishing employer of a pension scheme but if this employer has ceased then information on the original and latest participating and principal employers will be required.

Trustees must also provide details of the value of the assets of the pension scheme. HMRC is not seeking a formal valuation of the assets but would except trustees to provide a good estimate of the market value. If scheme accounts provide a reasonably good estimate of value at the point of first registration then this will be acceptable.

What should Trustees do now?

Trustees should liaise with their advisers to determine whether the regulations apply and if so to ensure that systems are in place to facilitate registration and disclosure when necessary. An appropriate description of the beneficiaries should also be agreed.

In most cases information must be provided to HMRC no later than 31 January after the tax year when the trustees first become liable to pay the taxes. Trustees must also update HMRC on any changes to this information no later than 31 January in the year after the change occurred. Information on the value of assets does not need to be updated as this is only collected in the year the trust is first required to register with HMRC.


For more information, please contact Lee Colgate on +44 (0)20 7427 6464 or at Lee.Colgate@crsblaw.com.

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