In June 2019 we responded to HM Treasury’s consultation on the transposition of the Fifth Money Laundering Directive and, in particular, the proposed requirement for all charitable trusts to register with the Trust Registration Service (regardless of whether or not they incur a tax liability).
In our response we expressed concerns about the implications of this new administrative burden for the charity sector whose resources are already constrained and explained that many charities will not be aware of the new requirement or its potentially far-reaching consequences. We also pointed out that charities (whatever their legal form) may, under the new rules, be obliged to register all of the innumerable donations that they hold on particular charitable trusts (for example, restricted and endowment funds).
We are therefore delighted by the proposal in HMRC and HM Treasury’s further consultation, published on 24 January 2020, that most charitable trusts should not be subject to the requirement to register. The rules will only continue to apply to the few charitable trusts which incur taxes (for example because they have received non-exempt trading income).
As the government acknowledges, the risk of UK charities being used as vehicles for money laundering and terrorist financing is low. As such, requiring them to comply with a new layer of regulation being brought in to tackle those specific issues would be disproportionate and unduly onerous.
If you have any questions about any of the issues raised in this update, please contact Laura Soley or Lucy Rhodes.