23 March 2018
As part of the wider move towards global transparency, the UK introduced a register of trusts for the first time this summer. The requirement to introduce the register was imposed by EU Directive, duly implemented in the UK by The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI No. 2017/692) (the 'Regulations'). Our earlier briefing is available here.
Importantly, there is no exemption in the Regulations for charitable trusts.
However, some welcome clarification about the Regulations and the Trust Registration Service (TRS) has now been issued in the form of HMRC guidance (available here).
For charitable trusts, the position is now clear:
All charitable trusts – new information requirement
The trustees of all charitable trusts need to maintain accurate and up to date written records of all 'beneficial owners', regardless of whether they are required to register in a given year.
The written information that should be maintained is:
- Full name of the trust
- The date on which the trust was created
- The country where the trust is considered to be resident for tax purposes
- The place where the trust is administered
- A contact address for the trustees
- Full name of advisers who are being paid to provide legal, financial or tax advice to the trustees (although it is not clear whether this relates to advice given in a particular period, for example, a tax year)
- Details of the settlors (including dead settlors) and beneficiaries such as name; National Insurance Number or Unique Tax Reference, if any; date of birth; address; and, if address is not in the UK, Passport or ID card details.
HMRC does not consider all donors to a charity to be 'settlors'. A donor who has 'no influence or control over the trust nor receives a financial benefit from the trust' will not be a settlor for these purposes;
This information is not public, but can be requested by law enforcement authorities in the UK or another EEA member state;
A foreign charitable trust with UK source income or UK assets on which it is liable to pay income tax, capital gains tax, inheritance tax, stamp duty land tax, stamp duty reserve tax or land and buildings transaction tax (Scotland) (a 'relevant UK tax') will be required to maintain this information even though it will not be registrable with any of the UK charity regulators.
So what does this mean for our charity?
The information required to be maintained internally must be collated. Trustees are quite likely to have most of this information to hand, but perhaps not all.
In addition, trustees should add this issue to their annual compliance calendar and include consideration of the registration requirement once a year (in advance of 5 October). For many, perhaps most, UK charitable trusts the impact of the TRS will end there because if properly run, a charity that has been recognised as such by HMRC is fairly unlikely to incur a relevant tax liability.
However, if in a given year the charity has incurred a relevant UK tax liability, for example, has incurred non-charitable expenditure or received non-exempt income, it will become registrable with HMRC even though this expenditure or income may have been a 'one-off'. If this is the case, the charity trustees should be aware of the deadlines for registration.
Charities formed outside the UK (including those formed in the EEA but not formally recognised by HMRC) are more likely to incur a relevant liability.
The timetable for registration will depend on the tax to which the charity has become liable. A table showing registration deadlines is available in our earlier briefing: Please click here.
Penalties may arise in the case of non-compliance.