5MLD and Trust Registration Service - impact on offshore trustees

This week, HMRC and HM Treasury published the summary of responses and the outcome to the trust register consultation.

This is an important update for offshore trustees, who may have been concerned about the possible need to register on the UK trust register simply because they engage with a UK adviser (such as an investment manager, lawyer or accountant).

The potentially wide scope of this "business relationship" rule would have led to additional costs of complying and the potential loss of confidentiality as a result of registration.

Helpfully, the response clarifies that a non-UK trust would need to have at least one UK resident trustee for this particular rule to be engaged: "The government recognises the concerns of the trust sector regarding the scope of registration where a ‘business relationship’ is entered into and the effect this could have on the registration of non-UK trusts."

"The government has opted to take a measured approach and will only require non-UK trusts to register on entering a business relationship with a UK obliged entity if the trust has at least one UK resident trustee. This means that non-UK trusts will not be required to register if their only link to the UK is through a business relationship with a UK based adviser."

This more measured approach will certainly be a welcome relief for the UK financial sector who felt that it was likely that offshore trustees would otherwise use services outside the UK as a result.

Offshore trustees should remember that they will continue to be required to register if they have UK tax liabilities. This may for example be the case if the trustees hold UK assets which generate UK source income or which give rise to inheritance tax liabilities.

In addition, offshore trustees will also have to register if they acquire UK real estate. This is separate to the requirement (which will be introduced next year) for overseas entities to register with the Land Registry before they can acquire UK real estate.