Trusts already have to register the personal details of the person who funded the trust, and of the trustees and the beneficiaries, with HMRC. This came out of EU cooperation on tax transparency. The UK has sought to gold plate these regulations and therefore tax transparency is not likely to disappear after Brexit. Indeed, the UK have just enacted regulations bringing into force the EU Fifth Anti-Money Laundering Directive (5AMLD).
Trusts without UK tax consequences do not have to register – for example a trust which holds a house lived in rent free by a beneficiary and so produces no income or capital gains and which had no tax to pay on being set up due to tax reliefs. The trust register is not accessible by the public.
5AMLD requires this to change. It requires the public to have access to the trust register. It requires the trust register to be extended to trusts without immediate tax consequences – this may for example extend to life policy trusts which are inactive unless the life assured dies, and trusts embedded in property titles. This is expected to require 10 times as many trusts to register with HMRC than currently have to. These changes have been delayed until later, following a consultation on how to make those changes and the type of trusts that will be required to register.
In anticipation of the UK’s obligation to widen access to the register to the public, HMRC has already set out the process by which trusts can ensure only those with a legitimate reason – usually a trustee, or their solicitor or accountant – can access and update details. This may be good news for those who wish to preserve the privacy provided by family trusts. In order to preserve privacy in any event, the drafting of a trust deed requires to be done carefully and the inclusion of individuals named in the trust requires bespoke advice.
Compliance around trusts is ever widening and will not go away with Brexit. These are surmountable challenges and trusts remain a preferred vehicle for many families holding and passing on wealth. Please contact us if you are connected with a trust or if you would like to discuss setting one up.
On January 7, 2020