Push for transparency in trusts
Business Industry Do you have a trust in your life? While you may not be the fortunate beneficiary of a long-established family trust, the chances are that you will have contact with some form of trust in your personal finances. Trusts are embedded in our legal system, in the ownership of property, the structure of investments and even in commercial transactions.
In recent years, there has been increasing public concern that trusts, particularly in the off-shore arena, are open to abuse and may be used to facilitate tax evasion. To tackle these concerns, a growing raft of transparency measures has been introduced. Of these, the most significant is the creation of the UK Trust Register.
What is the UK Trust Register?
Since July 2017, a trust that incurs a UK tax liability must record on the register the details of both its major players (settlor, trustees, beneficiaries) and the assets it acquired at commencement. This information is available to HMRC and law enforcement agencies.
In a recent government review of trust taxation, respondents were asked how to further enhance trust transparency. In the Association of Taxation Technicians (ATT) response, we highlighted how trustees can currently end up reporting the same information to HMRC twice.
For example, the register requires great detail on the initial assets placed into a trust - information that rapidly goes out of date and is reported elsewhere for tax purposes. Yet, at the same time, the data on the trust’s major players is only updated if and when the trust incurs a further UK tax bill. Nor does the register contain, as the regulations demand, details of all advisers to the trust.
A better balance of information
Our proposal is that the register should look more like the Companies House Register, with changes in key players – such as trustees – being updated as they happen, but reduced disclosure where information has already been provided elsewhere.
Our aim is to balance the reporting burden on trustees by ensuring that the register holds relevant information. We also proposed that the data held should be used to support trustees in meeting their tax obligations, which would provide a benefit to both trustees and HMRC.
Subject to Brexit, further EU regulations will significantly increase the scope of the register next year, with trusts that are part of day-to-day personal finances – such as life policies or jointly held property – potentially becoming reportable. In addition, the data held on the register will be opened up to anyone with a ‘legitimate interest’.
At that point, the issue of trust transparency will start to affect many more people and, while it is one thing being transparent with the State, widening transparency of trusts with the world at large could pose some interesting challenges.