Are trusts still private arrangements?
18 April 2019Transparency is the order of the day. We already have a public register of people who own or control UK companies and in 2021 there will be a public register of owners/controllers of non-UK companies which hold UK real estate.
The government says this is all to do with combating money laundering and terrorist financing. But it is also about making sure that people pay their tax liabilities.
When it comes to transparency, trusts are no exception. The EU already requires member states to maintain a central register of taxable trusts. However, the government has this week released a consultation on the implementation of the EU’s Fifth Money Laundering Directive which significantly extends the transparency requirements for trusts.
- All EU trusts will have to be registered and not just those trusts which are taxable. This could include, for example, trusts which just hold a life policy and are therefore effectively dormant until somebody dies and may even include simple joint ownership of real estate.
- Some non-EU trusts will have to register if they own UK real estate or engage advisers or other service providers (such as banks or investment managers) in the UK.
- The information on the register will be available to anybody who has a “legitimate interest”. This could include investigative journalists with a track record in uncovering wrongdoing but only where they have some evidence to support their suspicions.
- If a trust which is on the register owns more than 25% of a non-EU company, the information about the trust will be accessible to any member of the public whether or not they have a “legitimate interest”.
There is still some time to get ready for this. The new rules will only apply from January 2020 and existing trusts will have until the end of March 2021 to register.
Going forward however, new trusts will only have 30 days to register and any changes to the registered information will need to be notified to HMRC within 30 days of the change.
HMRC’s existing trust registration has been plagued with technical difficulties. Let’s hope that these have been sorted out by the time the new rules come into force.
At the moment, it is only EU member states who are required to keep a trusts register. However, as can be seen, these changes will also impact some non-EU trusts which have EU connections.
Public registers are becoming the new normal and there is no sign at the moment of the tide turning. Trusts were once private arrangements but it seems likely that this privacy will continue to be eroded.
The changes are significant. For those in the industry it is worth reading chapter 9 of the Consultation Paper and considering responding to the Consultation.
These amendments and new provisions will further strengthen transparency and the existing preventative framework, whilst ensuring the UK adheres to international standards set by the Financial Action Task Force.
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