TRSM70050 - Discrepancy reporting: contents: Material discrepancies

Relevant Persons are required to report to HMRC if they find any material discrepancies between the wider information they hold on the trust and the information on the Trust Registration Service (TRS) excerpt of the register (this is referred to as the proof of Registration (POR) document see TRSM70010). Relevant Persons are also required to report to HMRC if a registrable trust (see TRSM21010) is not registered on TRS.

A material discrepancy is a discrepancy that may reasonably be considered:

  • to be linked to Money Laundering or Terrorist Financing
  • to conceal details of the business of the trust

Discrepancies linked to Money Laundering or Terrorist Financing

Relevant Persons may reasonably consider that a discrepancy is linked to Money Laundering or Terrorist Financing, for instance they may have additional information, or may have discovered suspicious or uncharacteristic activity when undertaking ongoing monitoring.

Relevant Persons must inform HMRC if they reasonably consider that discrepancies are linked to Money Laundering or Terrorist Finance. Details of any corroborating evidence, and other relevant information, should be provided in the ‘Details of the Report’ section of the discrepancy reporting form (see GOV.UK, how to submit a report).

The material discrepancy reporting duty does not impose an obligation on Relevant Persons to conduct any additional due diligence other than that required within the MLRs: for instance the Relevant Person is not required to investigate the activities of the trust to further substantiate, or refute, any suspicions of Money Laundering and Terrorist Financing. The duty to report a discrepancy applies if the Relevant Person finds a material discrepancy between information in the excerpt of the register, and information which becomes available to them while carrying out their MLR duties (for example, when they are conducting existing processes to meet the requirements of the regulations).

Discrepancies that may conceal details of the business of the trust

Relevant Persons do not need to consider whether concealment is deliberate or not, only whether the manner of how the trust information is presented could conceal details of the business.

The business of the trust

Considering the business of the trust could include, for instance, identifying the purpose for which the trust exists, the assets which are used to satisfy that purpose and their source, and the beneficiaries of that purpose.

Examples of material discrepancies

The following examples of material discrepancies should be reported, if the Relevant Person has not been able to resolve them with the trustee:

  • a registrable trust has not been registered on TRS
  • TRS record does not contain all the beneficial owners of the trust
  • there is required information missing from the excerpt of the register (see TRSM70010) (for example, some or all of a beneficiary’s details)
  • a difference in the information (compared to other information which Relevant Persons hold) exists which means that the identity, or the nature of control, of the beneficial owners could not be reasonably discerned. For example:
    • the beneficial owner’s name, month and year of birth, country of residence, nationality etc, for example, any discrepancy that is not a simple spelling / input error.
    • differences in any addresses which could prevent official communication / investigation, for example, the wrong city being listed.
    • a beneficial owner’s nature of control is incorrectly represented i.e. they are shown as a settlor when they are the beneficiary.

The following would not be considered material discrepancies:

  • minor spelling errors /differences in names or shortened versions such as Cath Smith rather than Kath or Catherine Smith
  • missing or differently spelled middle names
  • common abbreviations – for example, St. instead of Street, Co. instead of company
  • trust name: the Proof of Registration document only allows 53 characters for the trust name: if it is clear that the trust name has been shortened or abbreviated solely due to the 53-character limit, this is not a material discrepancy
  • trust start date: a difference of up to 24 months for will trusts and 12 months for all other trusts would not be a material discrepancy
  • taxable status: if a trust is believed to have the wrong taxable status, this is not reportable under this process, however, errors or omissions in UTR or URN numbers are reportable
  • classes of beneficiary: it is permitted that trustees may break up a lengthy class description into parts A, B or the description may be abbreviated provided that there is no material difference (between the excerpt and other information) regarding who may or may not be a beneficiary.
  • date of birth: The Proof of Registration document presents date of birth as month and year of birth (MM/YYYY), the day of birth not being displayed is not a material discrepancy

Example

Michael has provided his accountant with an excerpt of the register on which the trust is referred to as ‘Mrs Jones, education trust for Alice Jones’. The accountant has a deed of trust that refers to ‘Mrs Beatrice Jones, education trust for Alice Jones 1986’. The accountant can see from both documents that the details of the beneficial owners are the same. This difference in trust name is not a material discrepancy.

Example

Eloise has provided her solicitor with an excerpt of the register on which the trust is referred to as ‘Mr Parsley trust for A Jones’. The solicitor has deeds that refer to a trust of the name of ‘A Parsley, trust for various parties’. The solicitor can see from both documents that the details of the beneficial owners are not the same. The business of the trust may not be as the name provided by the trustee indicates or the trust may not be the same entity, discussion with the client has failed to resolve the nature of the difference: This difference in name is a material discrepancy.

Example

M Smith trust services discovers that a trust previously assessed as low risk is now engaging in several unusually high value transactions to several high-risk countries: this triggers Customer Due Diligence checks and a Suspicious Activity Report (SAR) has been made to the United Kingdom Financial Intelligence Unit. The excerpt of the register reveals that the country of residence has now been removed for one of the beneficiaries. M Smith reports the discrepancy to HMRC (remembering not to disclose any information to HMRC or the trustee regarding the SAR) and confirms that they reasonably consider that under the circumstances the discrepancy may be linked to Money Laundering or Terrorist Financing.

If Relevant Persons reasonably consider that any material discrepancies are linked to Money Laundering or Terrorist Financing, the basis for this concern should be provided in the text box in the ‘Details of the Report’ section of the discrepancy reporting form (see how to submit a report). Relevant Persons have additional obligations, including consideration of whether a SAR should be submitted to the United Kingdom Financial Intelligence Unit.

However, Relevant Persons are not required to provide any further information apart from what is in the ‘Details of the Report’ section. Relevant Persons are reminded that they should not disclose to HMRC that a SAR has been submitted, if applicable.

If you require guidance on making a SAR or you wish to report suspicious activity, please go here: Tell us about suspicious activity that may be linked to money laundering - GOV.UK