HMRC guidance on new money laundering regulations; a relief for many trustees

The new Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 came into force on 26 June 2017, containing potentially burdensome reporting and registration requirements for trustees. However, HMRC guidance issued in October 2017 has clarified and simplified the compliance requirements for occupational pension schemes; in practice for most schemes there will be no need to register with HMRC for the purposes of these regulations, and the record keeping requirements of the regulations should already be in hand.

Registration and reporting to HMRC

Most UK occupational pension schemes will not need to register with the trust registration service (TRS) and therefore provide detailed information to HMRC. This is because registration only applies to occupational pension schemes that pay ‘relevant UK taxes’ in relation to the income or assets of the trust. ‘Relevant UK taxes’ comprise income tax, capital gains tax, inheritance tax, stamp duty land tax, stamp duty reserve tax, or land and building transaction tax (Scotland). However, the guidance confirms that registered pension schemes whose trustees/scheme administrator has to pay UK income tax solely for certain reasons will not need to register. These reasons include that they are liable:
• to tax under PAYE on payments of pension or lump sum benefits to members and beneficiaries;
• to certain charges under the Finance Act 2004 such an unauthorised payment charge;
• jointly and severally with the member for lifetime allowance charges.

Records of beneficial ownership

The HMRC guidance confirms that trustees are required to maintain accurate and up to date written records of all the beneficial owners of the trust, regardless of whether or not there is a requirement to register with the TRS.

Broadly, the beneficial owners of an occupational pension scheme are:

• The settlor (the original employer, or if it has ceased and there have been a number of different employers, the original and current participating employer(s))
• The trustees
• The members and potential beneficiaries

Where a beneficial owner is an individual, the information that must be recorded includes their name, NI number or unique taxpayer reference, their date of birth and the nature of their role in relation to the trust.

Where a beneficial owner is a company, the information that must be recorded includes the legal entity’s name, unique taxpayer reference, registered office, the legal form of the entity, and the law by which it is governed; the name of the register of companies in which the legal entity is registered, and the nature of the role of the entity in relation to the trust.

HMRC has clarified that trustees are not required to maintain records of all potential beneficiaries to whom a trustee may pay a benefit at their discretion after the member’s death unless they are known to the trustees. HMRC’s guidance also confirms that, where the number of named beneficiaries exceeds ten, trustees will only be required to identify the class of beneficiary and record a description of that class rather than the more detailed information required for individuals, as set out above.

Given that trustees are under an existing duty to maintain membership information this should not create a significant additional burden. However, they should be aware of the record keeping requirements and of triggering the wider registration and reporting requirements by incurring liability to any of the ‘relevant UK taxes’. Key actions include:

• Identifying what taxes the scheme pays so as to determine if registration is needed
• Ensuring the employer(s) tax reference details are obtained as trustees are less likely to have these already
• If relying on scheme administrators to maintain records of the beneficiaries, review administration agreements to ensure the obligation on the administrators to do so applies for the purposes of these regulations