UK Pensions Speedbriefs - Further update on implications of new money laundering regime for pension scheme trustees

• United Kingdom

• Pensions disputes

14-12-2017

A previous speedbrief highlighted new money laundering regulations issued by the Government in June 2017.  The regulations are aimed at preventing money obtained as a result of criminal activities from appearing to come from legitimate sources and from being used to finance terrorist activities.

We summarised our understanding of how the regulations would affect pension scheme trustees in an updated speedbrief in September.

Since then, HMRC has issued (and then revised) draft guidance in the form of FAQs which deal with what trustees will need to do to comply with the new record-keeping and registration requirements. In some cases, the FAQs appear to go beyond what is required in the regulations. 

This speedbrief summarises our understanding of what HMRC is currently requiring trustees to do.  If it changes again, we will update you.

Record keeping

One of the key obligations that trustees have under the new regime is to keep certain records.  They will need to keep information about:

• Employers: The Guidance says that where the scheme has a long history of employers participating and then ceasing to participate, trustees do not need to maintain records of all of the employers that there have ever been. They need to keep information about the original and current participating employers only.

The information required depends on whether the employer is an individual or some other form of legal entity but in either case includes things like name and address.

• Advisers: The full name and address of any advisers who are being paid to provide legal, financial or tax advice to the trustees in relation to the scheme.

• Trustees: A contact address for the trustees. Additional information needed in respect of each trustee will depend on whether the scheme has individual or corporate trustees and will be the same as that required in relation to employers.

Where a third party requests information from a corporate trustee as part of their money laundering customer due diligence requirements, additional information will need to be provided to them including details of “the senior persons responsible for… operations”, the legal owners of the trustee company and any “beneficial owners” (which will include anyone who owns more than 25% of the shares or voting rights), together with the articles of association.

• Beneficiaries: Details of individual members and beneficiaries who are named in the trust documentation (which will be rare) and any members or beneficiaries “when they receive a financial or non-financial benefit from the trust after 26 June 2017”. This means that trustees should ensure they have the relevant records in place in relation to individual members once they are in receipt of benefits from the scheme. Trustees will already have much of the required information in relation to members and beneficiaries but should check, particularly in relation to non-UK resident members who have no UK national insurance number or taxpayer reference number as more information may be needed in relation to them.

Trustees also need to keep details of the classes of actual and potential beneficiaries as this is what will need to be disclosed to third parties who ask for information to comply with their own money laundering obligations.

• Individuals with control: If any other individuals (such as a members’ committee) exercise or can veto the exercise of any powers under the trust, relevant details of such persons may also need to be kept.

A paid professional trustee will be required to keep the records referred to above for “a period of five years after the date on which the final distribution is made under the trust” (which will be when the scheme is wound up).

Where this information is given to a third party as part of their own money laundering due diligence and any of it subsequently changes, they must be told of the change within 14 days.

Registration

The trustees will need to register with the new Trusts Registration Service if the scheme was liable to pay any “relevant taxes” in the 2016/17 tax year or subsequently becomes liable to any of them. “Relevant taxes” for these purposes are income tax, capital gains tax, stamp duty reserve tax, stamp duty land tax or Scottish land and buildings transaction tax. The majority of schemes are unlikely to be liable to any of these.

• Registration deadlines: Where trustees were registered for self-assessment before the 2016/17 tax year, originally they needed to complete a registration by 31 January 2018. HMRC has now said that it will not take any enforcement action if registration is completed by 5 March 2018. Where trustees became registered for self-assessment during the 2016/17 tax year, originally registration needed to be completed by 5 October 2017 but this has now been extended to 5 January 2018. Where trustees incur a relevant tax liability in any subsequent tax year, they will need to register by the 31 January following the end of that tax year.

• Information about employers and trustees: There is only room on the online form to record two employers. HMRC says that where there are more, trustees should write to them to provide details of the additional employers. Likewise, there is only space to record five trustees (one of whom should be the chair) and details of any additional trustees will also need to be provided to HMRC separately.

• Information about beneficiaries: HMRC’s guidance says that “To help keep administrative burdens to a minimum for business type trusts with particularly large number of beneficiaries (such as occupational pension schemes…) the trustees will only be asked to identify the class of beneficiary if the number of named beneficiaries exceed ten”. This means that were there are more than 10 beneficiaries either named in the trust documentation or in receipt of benefits, only class information will need to be registered.

• Information about advisers: The regulations require details of any adviser providing legal, financial or tax advice. However, HMRC guidance says that to “keep administrative burdens on trustees to a minimum” all that is required are “the details of the agent (if one exists) that is acting on behalf of the trustee in relation to the trustees’ registration affairs”, otherwise the name and address of all relevant advisers will be needed.

Once registration has been completed it will need to be updated each 31 January for so long as the scheme is liable to any relevant taxes.

What next?

Trustees should start by identifying whether they have an obligation to register because they pay relevant taxes and if so, what the deadline is for registration.

The record-keeping obligations already apply so trustees need to ensure that they have (or have easy access to) the information required by HMRC.  They should also update the scheme’s risk register to add compliance with the new requirements.

Professional trustees should be aware that they are subject to additional obligations in relation to risk management and customer due diligence.