• March 29, 2024
 4MLD: What does it mean for Wills and Probate?

4MLD: What does it mean for Wills and Probate?

The 4th Anti-Money Laundering Directive (EU) No. 2015/849 came into force on 26 June 2015 with an aim to enhance the existing strategy to counter both terrorist financing and money laundering.

This came into force domestically on the 26 June 2017.

As highlighted by Lesley King, the aim of the directive is particularly relevant for private client practitioners, given that trusts are structures that are often targeted by such crimes. In order to stop anonymous structures funding such causes, one of the key prevention measures is to improve the information available on beneficial ownership.

This aim is contained within Article 31 of the 4MLD which states that member states must:

‘require that trustees of any express trust governed under their law obtain and hold adequate, accurate and up-to-date information on beneficial ownership regarding the trust. That information shall include the identity of:

  • The settlor
  • The trustee(s)
  • The protector (if any)
  • The beneficiaries or class of beneficiaries
  • Any other natural person exercising effective control over the trust’

Where a trust generates tax consequences, the necessary information must be contained in a central register. Competent authorities will have access to this, and there are plans for it to be launched in summer 2017 according to the Government.

Where tax consequences are not created, the trustees must hold the information, and if required, pass it to the competent authorities.

A step to move towards this was made clear in December’s Trusts and Estates newsletter.

By establishing a trusts register, it stated that trustees will be provided with a single online access point to both register and update records, replacing the 41G form.

Amended on the 26 June 2017, the outcome of the government’s consultation also provided detail on how the 4MLD will impact those involved in the wills and probate industry, as well as trustees.

It details the aims of the government when considering the nature of information to be collected, highlighting the importance of the right balance being struck between combating trust misuse and reducing the burden on trustees.

The main aim of collecting certain information is for law enforcement and HMRC to draw links between parties related to a particular trust asset. Therefore, this would improve the ability of these organisations in identifying suspicious activity and being able to intercept it at an earlier point.

Regardless of function, Article 31 of the 4MLD requires any express trust with tax consequences to be registered. Under the legislation, this means any trust which was deliberately created by a settlor, expressly transferring property to a trustee for a valid purpose.

In light of this, where there is a transfer of the legal ownership of property from settlor to trustee, investment trusts are not the same.

“Tax consequences” refers to UK liabilities for numerous types of tax including capital gains tax, non-resident capital gains tax, income tax, inheritance tax, stamp duty reserve tax or stamp duty land tax.

As well as trusts with a UK tax liability outside of the UK, UK resident trusts with UK tax liabilities will be required to register.

Although contracts, wills and testaments will not need to be automatically registered, they will need to be if they create an express trust. Where this is the case, if a trust generates a tax consequence, the beneficial ownership information of the trust would need to be reported to the HMRC.

For trustees, information on the identity of the following individuals will be required:

  • Other trustees,
  • Beneficiaries
  • Settlors
  • Other natural or legal persons exercising control over the trust
  • Other persons identified in a document or instrument relating to the trust (including a memorandum of wishes)

The required information to be provided is:

  • Name
  • Correspondence address or contact details
  • Date of birth
  • National Insurance Number if they are resident in the UK (or Unique Taxpayer Reference if non-individual)
  • Passport or ID number with expiry date and country of issue if they are not resident in the UK

However, it will not be necessary to provide this information if a trust has a class of beneficiaries where not all have been determined. Trustees will instead be required to provide a description of the class of persons who are entitled to benefit.

General information on the nature of the trust will also be needed:

  • Name
  • Contact address
  • Date of the trust’s establishment
  • Statement of accounts describing assets
  • Country of residence for tax purposes
  • Place of administration

The statutory instrument can be accessed here.

Georgia Owen

Georgia is the Senior Content Executive and will be your primary contact when submitting your latest news. While studying for an LLB at the University of Liverpool, Georgia gained experience working within retail, as well as social media management. She later went on to work for a local newspaper, before starting at Today’s Wills and Probate.