A Q&A with James Campbell, a partner in Ogier's Jersey private client and trusts team…
What is the UK Trust Register and how does it operate?
James Campbell: The fourth Anti-Money Laundering Directive (AMLD 4) has been operative since 26 June 2017 and, amongst other measures, required EU Member States to implement a central register of beneficial ownership for trusts.
The UK, compliant with these requirements, introduced the UK Trusts Register and this trust registration service (TRS) is operated by HMRC. Access to data on the TRS is limited to HMRC who may also share data contained on TRS with other UK law enforcement authorities. Fundamentally access to data on TRS is not open to the public.
Which Jersey trustees are caught by the UK Trust Register and what is the penalty for breach?
JC: A Jersey resident trustee is subject to the obligations to maintain a register of beneficial owners and register with, and provide information to, HMRC if the trust receives UK source income or holds UK assets on which the trust is liable to UK income tax, CGT, IHT, stamp duty land tax or stamp duty reserve tax.
Sanctions for breach include civil penalties and statements of censure by HMRC and indeed criminal sanction although HMRC has clarified that the offence must be proportionate to the offence committed.
If caught what information will need to be disclosed to HMRC?
JC: For trusts which are caught trustees will need to disclose to HMRC the identities of all settlors, trustees, beneficiaries named in the trust, where there is a class of beneficiaries any beneficiary in the class who has received a benefit and is therefore identified and any individual who has control over the trust.
Power holders will be treated as having control over the trust, if for example, they are vested with reserved investment powers or the power of appointment or removal of trustees. Trustees must also register details of any individuals identified in a letter of wishes or similar document from the settlor outside of the trust, which is a significant extension of what we have seen to date in terms of FATCA and CRS reporting.
Are there any planning opportunities for Jersey trustees?
JC: There are potential planning opportunities for Jersey trustees, where settlors and trustees would prefer not to register and provide the information perhaps where the connection to the UK is tenuous or where there are material confidentiality concerns – for instance, protectors and other power holders may wish to step down, references to individual beneficiaries could be removed unless distributions are required, or individual beneficiaries may need to be described by class rather than by name.
Of course, Jersey trustees should take UK tax advice and Jersey law advice on the trust documentation as required.
Is the net likely to widen in terms of who will have access to data on TRS?
JC: On 20 December 2017 the latest round of amendments to the Anti-Money Laundering Directive (AMLD 5) were agreed between the European Parliament and the Council, with a view to increasing transparency within the EU by granting public access to beneficial ownership registers.
The final text of the amendments has yet to be published but according to a factsheet published by the Commission the new measures will not allow full public access to beneficial ownership registers of trusts. Fundamentally it is recognised that trusts may be set up for non-commercial purposes. Access to data about the beneficial owners of trusts will likely be accessible to law enforcement authorities and professional bodies subject to anti-money laundering rules, such as banks and lawyers. It is anticipated that trust beneficiary information will also be accessible to third parties who can "demonstrate a legitimate interest".
Clarity on no public access is good news and AMLD 5 is understood to provide clarification on the key issue of ‘legitimate interest’. It is not clear at this stage whether it will be left to individual Member States to define legitimate interest in which case this could result in a material divergence of interpretation and application.
The Commission anticipates that AMLD 5 will be published in mid-2018 and will come into force by the end of 2019. Further, national beneficial ownership registers of trusts will be accessible to persons with a legitimate interest in early 2020. This timing may be optimistic in terms of Member States being able to implement the proposed changes by the end of 2019.
What is the UK's position on all of this?
JC: The UK Government has now helpfully confirmed in a letter dated 17 January 2018 from HM Treasury to the European Scrutiny Committee that it is opposed to public access to the trust register and further expressly recognised that many trusts are established for personal or family reasons. This is significant in our view.
Of course, Jersey's concerns mirror those of the UK when it comes to privacy and the use of trusts noting that trusts are commonly used in the UK for onshore structuring purposes.
What is the conclusion?
JC: There are still significant issues which have yet to be determined but on the positive side it seems likely that there will be no full public access to national beneficial ownership registers of trusts. It is also a hugely positive development that the UK Government has expressly recognised the privacy issue at the heart of any public register on trusts. On this point it seems plain that access to trust registers should be limited to enforcement agencies only.
Ogier does not advise on matters of UK law and this article should not be relied upon as determining the position under UK law.
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