It’s been on the horizon for a long time. It’s been much debated. Nobody will ever be completely satisfied with the approach. It’s also here.
When the ink was dry on the EU’s Forth Anti-Money Laundering Directive in June 2017 the requirement for a register of the beneficial owners of trusts was established and enacted into local law across the EU. It came in via Statutory Instrument to the UK legislation and is likely to remain after the Brexit enacting laws are redrafted, as it remains part of best international practice.
The reasons for having this are abundantly clear given the direction international tax transparency has traveled in recent years. The information is required to be held anyway as a result of international anti-money laundering and countering the financing of terrorism requirements and it is integral to both FATCA and CRS. It now going to be included in a national register for UK resident trusts and non-UK resident trusts that pay tax in the UK.
It will take the form of an online Government register which will not be open to the public (at least for now) but will be available to search by law enforcement bodies and the UK Financial Intelligence Unit. This is in stark contrast to the “People with Significant Control” register for companies which is open to the public – a step mostly welcome, at least by the fiduciary industry. However, the European Commission has published proposals to amend the directive including making public access to the trust register mandatory. Only time will tell if this is enacted and will affect the UK. To date the UK government has been a vocal opponent having public registers of trusts, but if the directive is amended before the UK leaves the EU, the UK would have to amend its regulations – at least while still an EU member.
Interaction with Privacy Rights and Data Protection
A public register will inevitably give rise to concerns about data protection rights and rights to privacy. April 2018 will see the implementation also of the General Data Protection Regulation (GDPR) strengthening such rights in relation to EU citizens. For more on the impact of GDPR please see our earlier article here.
On this subject, a register of trusts initially made available to the public was ultimately declared unconstitutional by the French Supreme Court and subsequently withdrawn from the public domain. The conclusion reached has been the subject of some divided opinion. It stated that:
‘A reference in a publicly accessible register of the names of the settlor, beneficiary and administrator of a trust provides information on how a person intends to dispose of his or her estate. This results in a breach of the right to respect for private life.’
This is obviously a reference to a breach of Article 8 protected human rights. It went on to state that by not restricting access to the information it had ‘disproportionately interfered with the right to private life in light of the pursued objective’. This has led to some commentators claiming it is just the ‘public’ aspect of this that is unconstitutional and others claiming it is the register itself. With similar test cases being sought for challenging the Common Reporting Standard on similar grounds its an area worth keeping an eye on.
Registration is performed through the Trusts Registration Service. The register will ask for information such as:
- The name of the trust and its creation date
- Details of the trust assets, such as a statement of account for the trust, describing the trust assets and identifying the settlement value of each category at the date on which the information is first provided to HMRC. This would include the address of any property held by the trust.
- the identity of the ‘Beneficial Owners’ – Settlor, trustees, protector (if any), all other persons exercising effective control over the trust (if any) and the beneficiaries or class of beneficiaries
- The jurisdiction of residence for tax purposes and whether if it has ever been non-resident
- The address at which the trust is administered
- The details of any advisers providing legal, financial or tax advice in relation to the trust
- Where a trust has a class of beneficiaries of which not all have been determined – a description of the class of persons who are entitled to benefit from the trust
- Where a beneficiary is entitled to a fixed share of the trust income – the relevant percentage.
Trustees will be required to register on or before 31 January 2018 for trusts already in scope due to being subject to UK taxes or, for those not yet in scope, on or before 31 January following the first tax year in which they become in scope for UK tax.
Trustees will have to update the register every year in which the trust is subject to UK tax consequences. If the trustees are not aware of a change to any of the information held on the Trust Register they must still confirm that fact. Filing is required on or before 31 January each year.
The Register will also provide a single point of access for personal representatives and their agents to register complex estates and update their records online, replacing the current paper process for personal representatives to notify changes in their circumstances.
In order to obtain a UTR for the estate The Executors of new complex estates will also need to register with HMRC through the online registration service. The register will ask for basic information such as the identification of the deceased and the executors.
Trustees will be required to keep accurate and up-to-date records of all beneficial owners and potential beneficiaries referred to ‘in a document from the settlor relating to the trust such as a letter of wishes’. Paid professional trustees must retain these records for five years after the date on which the final distribution is made from the trust.
Trustees will also have to disclose their status as a trustee when entering in to business relationships with the likes of financial institutions, lawyers, accountants and estate agents.
For help and support with the above or additional experienced resources to help manage such changes in compliance please use the contact form on the website.
A lot of commentators seem to support the use of blockchain for maintaining registers of beneficial owners. Its an interesting use of emerging technology that we’d like to see more discussion on. Guernsey’s own register of beneficial owners being one possible use.