In 2005 John Christensen and I wrote this in Tax Us If You Can - the manifesto of the fledgling Tax Justice Network that went on to become the de facto manifesto, then and now, of that movement.
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.
- 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, though, 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.
I was therefore pleased to note this in the Financial Times this morning:
As many as 1mn trusts in the UK could be caught by a new requirement to register on a government list, with the risk of fines and difficulties accessing professional advice for those failing to sign up, tax experts have warned.
New rules due to come in on September 1 will require most new and existing trusts to register on HM Revenue & Customs' online Trust Registration Service.
As they add:
The list will be accessible to people with a “legitimate interest”, including journalists, leading some to worry about an erosion of privacy.
There will be much wailing and gnashing of teeth about this, but if we are to beat offshore secrecy we have to lead the way, which the EU did with this requirement, which we had to adopt last year as a result.
No one thought of doing this until Tax Us If You Can was published. I'll take some credit for those gnashed teeth. This is a step forward for tax transparency in a world that so obviously needs it.
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This is not really the start, but it is another step.
The trust registration service started in 2017, for trusts with a UK tax liability. https://www.legislation.gov.uk/uksi/2017/692/regulation/45 Those original regulations were introduced to implement the EU Fourth Money Laundering Directive
What is changing now is that trusts without any tax liability are being required to register too, plus a degree of public access to the register. The regulations to make this change were passed in September 2020, but amended a few weeks ago to put the implementation date back from March to September 2022. https://www.legislation.gov.uk/uksi/2017/692/regulation/45ZA https://www.legislation.gov.uk/uksi/2017/692/regulation/45ZB
Despite Brexit these new changes are implement the Fifth Money Laundering Directive. The EU is now on to its Sixth Money Laundering Directive, and the UK thinks it is already compliant so no further changes were made.
Trusts are used for all sorts of purposes by normal people all the time, often without really noticing, and lots of trusts are still excluded from registration – for example, pension scheme trusts, insurance “written in trust”, charitable trusts, will trusts (for the first two years), trusts for co-ownership (where the trustees and beneficiaries are the same persons – for example, where a couple owns their home – but not if one died and someone else inherits their share as a tenant in common; and not for example if there are more than four co-owners), bare trusts pending registration of transfer of legal title, and trusts incidental to commercial transactions. https://www.legislation.gov.uk/uksi/2017/692/schedule/3A
Thanks
But this is the key change – the trusts used for opacity
Depends on what you mean by “trusts used for opacity” . Some of them were required to register from 2017. Some of them (particularly if they are not UK resident) still won’t be required to register.
I am aware, but it’s still progress
Fabulous news, well done Richard and all
Will they enforce it though?
Probably not
“Trusts are a principal vehicle of tax injustice”. This is undoubtedly true.
Given the current war in Ukraine and the acts of terrorism which Putin’s forces are doing, the oligarchs that support Putin and have benefited from his regime are thus supporters of terrorism. By extension, those that administer “Trusts” for oligarchs are supporters of terrorism. I have no doubt, Putin will at some point tap the oligarchs for money & thus the trusts to keep things rolling. This Guardian article gives a flavour of the current untouchability of “trusts”.
https://www.theguardian.com/world/2022/mar/22/alisher-usmanov-ex-arsenal-shareholder-russian-bilionaire-assets-sanctions
Brooke Harrington’s “Capital Without Borders” provides a useful profile of the operation of trusts, “private wealth” etc. The administrators often live in the leafy groves of Surrey etc and it would be trivial to pick them up, as facilitators of state terrorism. Let’s just imagine it is Sept 11 2001 & Osama BinLiner had a trust. How long would that be allowed to operate?
Of course, this will not happen, the adminstrators in their leafy suburbs are doubtless active members of their local Tory parties with all the implications that carries. Which begs the question: is the tory party and tory government a facilitator of state terrorism? The tories don’t care about “injustice” of any sort. But it is not a good look being labeled a facilitator of terrorism – which is the case now. Tories, terrorisms little helpers.