HM Treasury issues a draft of the social security benefits up-rating order 2020
HM Treasury has issued a draft of the Social Security Benefits Up-rating Order 2020. This confirms the April 2020 increases to various Social Security payments. It confirms that:
- The New Single-tier State pension will increase from £168.60 per week to £175.20 per week.
- The Basic State Pension will increase from £129.20 per week to £134.25 per week.
- The Category D State Pension will increase from £77.45 per week to £80.45 per week
Money & pensions service sets out a ten-year vision to improve millions of lives
The Money & Pensions Service (MaPS) has set out its strategy to improve the UK’s financial wellbeing. They have identified five priority areas to help people make the most of their money and pensions.
They hope that by 2030 they will achieve the following goals:
- Financial Foundations – 2 million more children getting a meaningful financial education.
- A nation of Savers – 2 million more working-age ‘struggling’ or ‘squeezed’ people saving regularly.
- Credit Counts – 2 million fewer people using credit for food and bills.
- Better Debt Advice – 2 million more people accessing debt advice.
- Future Focus – 5 million more understanding enough to plan for, and in, later life.
Initially, MaPS will work with leaders and experts to set out clear delivery plans to achieve the five goals. They will create specific plans for England, Scotland Wales and Northern Ireland.
You can access the full strategy document here.
The UK finalises cross-border tax planning disclosure regulations
The Government has implemented DAC6 requirements on the mandatory declaration of cross-border tax arrangements.
DAC6 is a European Directive. It introduces disclosure designed to detect aggressive tax planning across EU borders. HMRC published draft guidance and legislation for DAC6 implementation on 22 July 2019. Many professional bodies criticised the proposals as being too broad. The Government has now published revised regulations. HMRC say they take account of these, and other, criticisms.
HMRC is currently working on guidance to support the regulations.
The reporting requirements apply from 1 July 2020. Retrospective reporting will be needed for arrangements as far back as June 2018.
Consultation on the proposed changes to the trust registration service – a detailed overview
The requirement to register trusts under the Trust Registration Service will be extended. This is as a result of the introduction of the 5th Money Laundering Directive.
This means trusts of certain life policies with an investment content need to register. This is the case even if there is no current tax liability.
The goal of the Money Laundering Directives is to ensure the UK’s anti-money laundering and counter-terrorist financing regime is up-to-date, effective and proportionate. As part of this, the Fourth Money Laundering Directive (4MLD) created a register of trusts. This is the Trusts Registration Service (TRS). This is where trusts need to register details of the trust. These include the name of the settlor(s), the trustee(s) and the beneficiary(ies). In general, trusts and estates should only register if they have a tax liability needing a tax return.
It is intended that the scope of the TRS will be extended by 5MLD, but the current rules remain in place. This means if a trust is excluded from registration under 5MLD (see below), but it has a tax liability, it will need to be registered.
The Government appreciates any extension to the TRS in 5MLD will create work for trustees and their advisers. They want to consult with interested parties over the extent of any new provisions before implementing them. The consultation period is short because the revised regulations must be implemented by 10 March 2020.
What trusts will be covered?
Currently, only trusts which have a tax liability have to register. This includes Inheritance Tax. So, a trust holding a single premium bond where no encashments are made would not need to register. At least until a 10-year inheritance tax charge arises.
Under the new provisions, all express trusts will need to be registered. This is irrespective of any tax liability.
What is an express trust?
An express trust is created by the express intention of the settlor.
FATF, an inter-governmental body defines an ‘express trust’ as one created by the settlor, usually in the form of a document, such as a written deed of trust. This type of trust can be contrasted with trusts that come into being through the operation of the law. These do not result from the clear intent or decision of a settlor to create a trust or similar legal arrangement (for example, an implied trust).
Are all express trusts required to register?
The Directive recognised the measures to implement the Directive should be proportionate to the risks. They should also have due regard to the individual’s right to the protection of personal data.
Therefore, certain trusts will not be required to register – these are known as “out of scope” trusts. Should an out of scope trust suffer a tax liability, it will need to register under the existing rules for a trust tax return to be issued.
So what trusts are out of scope?
Various trusts are out of scope.
Some trusts do not arise from the clear intention of the settlor but arise because of a statutory provision. A good example of this is an intestacy where statute introduces trusts to protect the interests of minor children. Another example is the imposition of a joint ownership trust so that people can own land jointly. The law imposes a trust in these situations – the trust does not arise from the intention of the settlor(s)
As the risk of money laundering in such cases is low, it is proposed that such statutory trusts will be out of the scope of the new provisions.
Other trusts that will be out of scope are:
- Trusts that arise where two or more people co-own an asset – such as a bank account or shareholding with concurrent interests;
- Bare trusts where a named beneficiary is absolutely entitled.
- Express trusts that have been established to, for example, meet certain statutory provisions that are required for beneficial tax treatment, for example:
- Maintenance fund trusts for historic buildings;
- Approved share option and profit-sharing schemes;
- Vulnerable beneficiary trusts;
- Personal injury trusts;
- Certain trusts of life insurance policies:
- The use of trusts to hold life insurance policies, income protection policies or policies solely for the payment of retirement death benefits is often for estate planning purposes.
- Where the trust consists solely of a policy which is a pure protection policy and payment is not made until the death or terminal illness of the insured, it is proposed that these trusts will not be required to be registered on the TRS as that would be disproportionate to the risk of them being used for money laundering or terrorist financing activity.
- It will be necessary to consider the precise ambit of this exclusion. For example, would it extend to critical illness carve-out trusts?
- Trusts of certain pension plans:
- Registered pension schemes held in trust are already subject to regulation by either the Financial Conduct Authority or the Pensions Regulator.
- There are also income tax controls on sums going into and out of the fund, and the benefits that can be provided by the funds.
- These controls reduce the risk of them being used for money laundering and terrorist financing and it is therefore proposed that they are not in scope for registration.
- Pension scheme trusts that are not registered with HMRC on ‘Pension Schemes Online’ or ‘Manage and Register Pension Schemes’ will be required to register on TRS.
- Charitable trusts need to satisfy a whole host of provisions to qualify.
- Trusts already registered in other EU Member States
What information will be collected?
For newly registered trusts with no tax liability, the trustees will only need to provide information on the settlors, trustees and beneficiaries.
The current system means that, where a trust registers, HMRC can set up a tax record for the trust, provide a Unique Taxpayer Reference and issue a trust tax return where required.
Trusts already registered on the TRS will need to give further information under 5MLD by accessing the updated TRS system when launched.
When must registration be made?
The Government has taken note of the responses received to the HM Treasury consultation. The regulations will come into force in 2020 and it is expected that TRS will be ready for these trusts to register in 2021. Therefore, the Government proposes that:
- trusts in existence at 10 March 2020 (in line with the Directive) must register by 10 March 2022;
- trusts that are set up after 10 March 2020 must register within 30 days, or by 10 March 2022, whichever is the later;
Who can access the information on the TRS?
There will be three distinct processes for the sharing of TRS data. These will be:
- An application process for ‘legitimate interest’ and ‘third country entity’ requests, for third parties to gain access to trust data;
- A mechanism for obliged entities (those entering into a business relationship with the trust) to receive the required extract from the register, managed by trustees through the TRS;
- The existing and continuing arrangements for law enforcement agencies.
For these purposes, the definition of legitimate interest will be set out in the regulations and this definition will aim to ensure that each request will be rigorously reviewed on its own merits, and access is given only where there is evidence that it furthers work to counter money laundering or terrorist financing activity.
Third country entity requests
Access to the beneficial ownership information on TRS may also be granted to a third party where a trust holds a controlling interest in a non-EEA legal entity. These “third country entity” requests apply where a trust registered on TRS:
- holds a controlling interest in any corporate or other legal entity;
- that entity is not required to be registered on a corporate beneficial ownership register in an EU member state.
Whilst anyone can make a third country entity request, the Directive states that the request may be refused where there are reasonable grounds to believe that the request is not in line with the objectives of the Directive.
The Directive requires that, when entering into a new business relationship with a trust, obliged entities must collect either:
- proof of registration on the trust register; or
- an excerpt of the register.
The Government proposes that the onus will be on the trustee to provide this information rather than the obliged entity having direct access to the register. This means the trustee has control over who sees the information.
Law enforcement agencies
There is currently a procedure in place for HMRC to share information with other law enforcement authorities. 5MLD does not change this process.
The withdrawal agreement and benefits and pensions for UK nationals in the EEA or Switzerland
The Department for Work and Pensions (DWP) has issued its guidance, on the Withdrawal Agreement and UK State Pensions and benefits.
Living in the EEA or Switzerland by 31 December 2020
The Withdrawal Agreement covers UK nationals living in the EEA or Switzerland by the end of 2020. If this applies, anyone’s UK State Pension will be uprated every year for as long as they live there. They will be eligible for the uprating even where they do not claim their pension until on or after 1 January 2021.
Also, those working in the EEA or Switzerland will be able to count future social security contributions towards meeting the qualifying conditions for their UK State Pension.
Moving to an EEA state or Switzerland from 1 January 2021
Those who move to live in an EEA state or Switzerland from 1 January 2021 will not be covered by the Withdrawal Agreement. The entitlement to UK benefits will depend on the outcome of the negotiations with the EU. They will continue to receive their entitlement to their UK State Pension, subject to the usual qualifying conditions. There is no guarantee these will be uprated.
Moving to Ireland from 1 January 2021
The position for those moving to Ireland has already been agreed and those UK nationals moving to Ireland from 1 January 2021 will continue to get their UK State Pension uprated.
Pension schemes newsletter 116 – January 2020
HMRC Pension Schemes Newsletter 116 covers the following:
- Pension flexibility statistics
- Pension Schemes Online service
- Managing Pension Schemes service
- Relief at Source – notification of residency status report for 2020 to 2021
- Trust Registration Service
One area of note is that from 1 October 2019 to 31 December 2019 HMRC dealt with over 10,000 tax reclaim forms. Over the period they also repaid over £32,000,000 in overpaid taxes.
Former accountant fined for misleading the pensions regulator over workplace pensions duties – 9 January 2020
A former accountant has pleaded guilty to a charge of knowingly or recklessly providing false or misleading information to the Pensions Regulator. He was ordered to pay a fine of £2,667, a £120 victim surcharge and £2,200 in costs.
Having been hired by a Cambridge-based company to enrol its employees into a pension scheme, Mr Rewrie admitted that he had falsely declared that staff at the company had been enrolled into a workplace pension scheme when he knew it was not the case.