HMRC has changed its policy on how affected pension schemes can satisfy the reporting obligation under Regulation 45 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 ("AML Regulations"). This is a welcome simplification for those occupational pension schemes that fall within the scope of the regulation.
1. AML regulations
The AML regulations impose (amongst other things) a duty on affected occupational pension schemes to report certain "beneficial ownership" information to HMRC and to update that information from time to time.
2. Taxable relevant trust
A pension scheme will be subject to this duty if, in the relevant tax year, it incurs a charge to any of the stipulated UK taxes, including stamp duty land tax and stamp duty reserve tax. Such schemes are "taxable relevant trusts" and have to meet the reporting requirements by the end of the January following the relevant tax year.
3. Trust Registration Service
For the first year of compliance, a taxable relevant trust had to register on HMRC's Trust Registration Service (TRS) and provide the relevant information on TRS by 31 March 2018 (delayed from the usual January deadline date in that first year).
4. HMRC's change in policy
Taking into account the difficulties pension schemes experienced using TRS, HMRC has changed its policy and relaxed the reporting requirement.
Trustees of a "taxable relevant trust" must provide "beneficial ownership" information to HMRC under Regulation 45 of the AML Regulations. A pension scheme will be a "taxable relevant trust" if it is liable in the relevant tax year to any of the following UK taxes: income tax, capital gains tax, inheritance tax, stamp duty land tax (SDLT), stamp duty reserve tax (SDRT) or land and buildings tax. We wouldn't expect many schemes to incur an income tax or inheritance tax charge, but there may be more schemes who have incurred the SDLT or SDRT charge. Trustees should speak to their investment advisers to check whether any such charges have been incurred in relation to the scheme's investments in respect of the 2017/2018 tax year.
For the first year of compliance, affected pension schemes had to register on HMRC's Trust Registration Service (TRS) and provide the relevant information on TRS by 31 March 2018 (delayed from the 31 January 2018 deadline date for that first year). A pension scheme was a "taxable relevant trust" for this purpose if it had incurred a prescribed UK tax charge in the tax year 2016/2017.
Where a pension scheme incurs a prescribed tax charge again in any subsequent tax year, there is an obligation under Regulation 45 to notify HMRC of any changes to the information originally submitted. This was originally intended to be done through TRS as well.
As 2018 draws to a close, schemes will be thinking of these requirements again, this time in connection with the 2017/2018 tax year and the 31 January 2019 deadline.
Taking into account the difficulties pension schemes have had over the last year with TRS, HMRC has changed its policy. Provided scheme details are kept up-to-date on the Manage and Register Pension Schemes Service (MRPS) or the Pension Schemes Online Service (PSO), HMRC will consider a pension scheme (that is a taxable relevant trust) and their trustees as having met their AML reporting obligations. HMRC's has issued various statements on its new approach; see for example its Newsletter 98 and Newsletter 103.
So, there is no need to register on TRS or indeed use TRS to submit or update any information for purposes of Regulation 45, provided a scheme is registered with MRPS or PSO. We would expect most pension schemes to be registered with MRPS or PSO. However, if a scheme is not registered with MRPS or PSO and it is a taxable relevant trust, then it will have to carry on using TRS for purposes of complying with Regulation 45.
If a scheme has already registered on TRS, it is possible to contact TRS for the entry to be removed.
Other AML obligations remain
Note that this doesn't in any way affect or change any of the other obligations placed on occupational pension schemes by the AML Regulations, such as the duty to keep accurate and up-to-date records in writing of the beneficial owners of the trust and to disclose that information to any of the prescribed law enforcement authorities.
HMRC's change of heart is a welcome simplification. Trustees should still check whether they are subject to the AML reporting requirement and in the first instance, speak to their investment advisers about whether the scheme has incurred a UK tax charge for the 2017/2018 tax year. If it has though, they can take comfort from knowing that complying with their obligations will be a much more straightforward process, provided the scheme is registered with MRPS or PSO.