Spring cleaning, the TRS and 5AMLD

 In Gill's Blog

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We have just been conducting a real clear out of the office. We had some paperwork going back to 2003! Do you find that there is comfort in being surrounded by paper? For some of you, it is the opposite – the paper mountain is the problem, and you would be less stressed if you were paperless. Like most things in life, some kind of happy medium is what is required. Eight bags of shredding later, we can now see the wood for the trees.

shredding paper

It is much easier to make decisions when you have not got to wade through a mountain of stuff to find that vital piece of paper, but you have a system to get right to it. It is also so much easier to explain your system to someone else if it is in order.

Trust review

Trust administrators are currently faced with more than a bit of spring cleaning too. Trust records cannot all be computerized. There is inevitably a paper mountain for each trust, varying in size depending on the age of the trust and its complexity. The job now is to be sifting through your records to make a number of decisions with regard to 5AMLD.

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Why not take this opportunity to also review the files, update your working records, put into long storage papers which are no longer immediately needed but which cannot be destroyed, and decide whether the trust is still performing as it should or was intended.

Trust administrators are currently faced with more than a bit of spring cleaning too. Trust records cannot all be computerized. There is inevitably a paper mountain for each trust, varying in size depending on the age of the trust and its complexity. The job now is to be sifting through your records to make a number of decisions with regard to 5AMLD.

Why not take this opportunity to also review the files, update your working records, put into long storage papers which are no longer immediately needed but which cannot be destroyed, and decide whether the trust is still performing as it should or was intended.

Is the trust an excluded trust?

Right now, in the absence of detailed Guidance from HMRC, trust administrators, armed with the overview guidance, which can be found here, must be distinguishing between trusts which are excluded from registration and those which are not. There are bound to be some cases where you are not sure but at least decide on the obvious ones.

There is a long list of excluded trusts which do not need to be registered including bereaved minor trusts, Aged 18-25 trusts, trusts which are closed down within 2 years of the deceased’s death, charitable trusts, personal injury trusts and disabled person’s trusts. You can immediately exclude from investigation for 5AMLD these trusts. You may still wish to audit them for other reasons whilst you are here, but they require no further deviling for registration purposes.

Of course, some of the excluded trusts may have to be registered anyway because they become taxable so do not forget the need to do that.

Is the trust a likely candidate for registration?

As to the types of trusts which are registrable, they obviously include discretionary trusts and interest in possession trusts whether created during lifetime or on death but as regards the latter only if they continue beyond two years from the death of the deceased. These types of trusts will be the backbone of most organisations’ trust work so plenty of trusts you do manage will need to be reviewed with registration under 5AMLD in mind.

What extra information is sought under 5AMLD?

What is it you are looking for? Well detailed information about each individual beneficial owner i.e. the settlor (if alive), the trustees and the beneficiaries. You need to gather not just the information you needed about each person for registration under 4AMLD but you also need to know the following:

  • Whether the beneficial owner is vulnerable to kidnap, violence, harassment, fraud etc
  • The age of the beneficial owner – those under 18 specifically
  • The mental capacity of the beneficial owner at the date of registration in accordance with s.2 MCA 2005

If you have not seen the beneficial owners for some time the first and last of these requirements will require a visit/meeting to ascertain the current position. In some cases, you may even need to appoint a specialist third party assessor to undertake the assessment of capacity. All this costs money.

Do you have a current retainer?

Therefore, trust administrators need to ascertain whether they have a current retainer to administer the trust or whether the retainer was discharged when the trust was created, and no further instructions have been received since. If you do have an on-going retainer, the trustees will need to discuss the ways in which the above costs are to be met.

Each registration will take several chargeable hours before you add in any assessment meetings so decide what you think your charges might be and those of third parties you might instruct to help.

Valuation?

The other area of potential difference, between 4AMLD & 5AMLD, is the question of the details and value of the trust assets at the time of registration. Although this is required on registration of taxable trusts, HMRC allowed the detail and value of the assets on creation to be used as they received updates in the self-assessment tax return. There will be no such returns in cases of registration under 5AMLD, so it is possible HMRC will require properties and other assets to be valued. Again, this will incur costs.

Conclusion

No-one wants to undertake work unnecessarily, so this year’s spring clean of your trust files should sift out trusts which do not need to be registered and any where you have no longer an ongoing retainer. All the rest go on the Action pile for a wide-ranging information gathering exercise, some of which I suggest you wait to do until we receive the detailed Guidance from HMRC later this year.
If you need more detailed help with this, why not ask me to help you with some training or with a project to support your trust administrators?

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