Pinsent Mason's website, out-law.com, has noted that:
From 26 June 2017, trustees of UK trusts and of non-UK trusts with UK tax liabilities will need to maintain accurate and up-to-date records of all the beneficial owners of the trust. They will also be required to report beneficial ownership information annually to HM Revenue & Customs (HMRC) to be kept on a UK register of trusts. The first information must be provided to HMRC by 31 January 2018.
The register of trust beneficial ownership was introduced to comply with the UK's obligations under the EU's Fourth Anti-Money Laundering Directive (4AMLD).
Under current law the register is only accessible by tax and law enforcement authorities. However, the European Commission is proposing that the 4AMLD should be amended to require trust registers to be publicly available. If the 4AMLD is amended before the UK leaves the EU, the UK would have to amend its regulations.
In 2005 I wrote this with John Christensen in what was, in effect, the first tax justice manifesto:
Trusts are a principal vehicle of tax injustice:
- They are used to hide wealth from tax.
- Discretionary trusts hidden behind nominee trustees create a secrecy space that is hard to regulate. Many states defend the lack of disclosure of accounting information by saying that the corporations in question are privately owned and therefore entitled to privacy.
- In common law countries, trusts are equivalent to secret bank accounts. This is a valid complaint of those countries that are being asked to remove their banking secrecy laws. Incredibly, charitable trusts own many of the offshore 'special purpose vehicles' that are used by so many companies as part of their international tax planning. This is an abuse of the concept of charity.
Trusts have been widely abused and they clearly need to be better regulated. They serve useful functions in such areas as:
- The promotion of genuine charities.
- The protection of children and the disabled who are unable to look after their own affairs.
There is no reason why every trust should not be required to disclose on public record the following:
- who created it
- what the trust deed says
- who the trustees are
- who the beneficiaries are, and in the case of discretionary trusts any potential beneficiaries listed in the settlement
- trust accounts
Trusts are given rights and privileges similar in many respects to those of limited liability companies. These rights and privileges should be balanced by a requirement for transparency and social responsibility.
We are on the way to achieving another goal. These things just take time.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
What is the mechanism by which trusts hide wealth from tax?
Trusts pay tax on income. They pay tax on dividends. They pay tax on capital gains. They have higher rates of tax and lower tax allowances.There is tax paid when assets are placed into a trust. There is a 10 year charge. I can’t see how tax is avoided. Can you give an example?
Thanks.
You ignore broader issues, and most especially inheritance
You also ignore the high risk of non-disclosure
Whilst ignoring the dangers of anonymity and offshore, where most trusts are just scams nit complying in any way with the UK concept of a trust
The lack of IHT is compensated for by the 10 year charge.
Non-disclosure is a risk in all areas. Trusts are no more or less prone to this.
Moving money off-shore doesn’t need a trust to achieve.
No, you are just shroud waving the spectre of trusts as some special tax evil when it isn’t.
Since you claim to be a tax expert you should know this. So I wonder what is going on. A deliberate attempt to fool your readers or a lack of any real understanding. Which is it?
I have already provided the explanation
Richard,
I am confused that TJN uses the term of “Beneficial Ownership of Trust” which in my view is not correct because a trust respectively its assets cannot be owned by any person legally. In my view a trust does have only beneficiaries who actually benefit from the trust`s assets but the beneficiaries do not own a trust. If you talk about “beneficial Ownership” I am certain it is meant the “settlor/grantor” but under normal circumstance in the case of an “irrevocable trust” which most of them are due to tax reasons related to the settlor/grantor. If it is not irrevocable then the settlor/grantor owns and controls the assets respectively those have to be declared on the settlor`s / grantor`s tax form.
Please give me your opinion at this stage I am a bit confused and like to know. Thx
Ruedi
I tend to agree: in a properly constructed trust there is no beneficial owner
But this is not true in most jurisdictions now where most trusts are no such thing: they are mere nominee arrangements under the control of the settlor
This debate on precision is ongoing: I am on your side
Richard,
if you mean by “nominee arrangement” a “letter of wishes” which the settlor issues and addresses it to the trustee (the Trust Company) then it makes sense to me that trusts do have a “kind of beneficial owner” because the settlor controls the trust (tells the trustee what to do with the assets of trust). If this is then made public (public registra of ownership of trusts) the trust is clearly in the area of a shame trust and the assets belong tax-wise on the tax form of the settlor at least from a Swiss Tax Authorities point of view..
I agree it is an ongoing discussion but we simply of to be aware of it that such a letter of wishes will never ever made public.
Thank you
Best,
ruedi
Paul Becket is usefully fuelling this debate
As is Brook Harrington
Have you read either?
Richard,
where do I find Paul Becket and Brook Harrington comments? Can you help me, please?
Thank you.
Both have written books
Brook is easy to find
I am actually not sure Paul’s is out yet: I had a review copy
Thank you