New reporting rules for trusts

As part of a new crackdown on money laundering, rules were introduced recently which require trustees to provide HM Revenue & Customs with detailed information about the assets held in trusts and the identities of trustees and beneficiaries.

The potential for the misuse of offshore trusts to avoid tax was highlighted in the Panama Papers affair in 2016, which embarrassed the then Prime Minister David Cameron.

The register in which the information will be held is available only to law enforcement agencies, but there is pressure from within the EU to permit public access.

It is not clear whether such an extension of the EU rules would apply to the UK post-Brexit, and this could be part of the Brexit negotiations. However, concerns have already been raised over the consequences of public disclosure for privacy, human rights and data protection.

The immediate concern is over the impact of the requirements on small family trusts, whose trustees may be unfamiliar with HMRC reporting.

The requirements will only be triggered if tax issues are involved, and this could be regarded as an additional argument for investing trust funds in investment bonds, which are already favoured for the investment of discretionary trust funds because, being structured as insurance policies, they produce no taxable income

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New reporting rules for trusts

As part of a new crackdown on money laundering, rules were introduced recently which require trustees to provide HM Revenue & Customs with detailed information about the assets held in trusts and the identities of trustees and beneficiaries.

The potential for the misuse of offshore trusts to avoid tax was highlighted in the Panama Papers affair in 2016, which embarrassed the then Prime Minister David Cameron.

The register in which the information will be held is available only to law enforcement agencies, but there is pressure from within the EU to permit public access.

It is not clear whether such an extension of the EU rules would apply to the UK post-Brexit, and this could be part of the Brexit negotiations. However, concerns have already been raised over the consequences of public disclosure for privacy, human rights and data protection.

The immediate concern is over the impact of the requirements on small family trusts, whose trustees may be unfamiliar with HMRC reporting.

The requirements will only be triggered if tax issues are involved, and this could be regarded as an additional argument for investing trust funds in investment bonds, which are already favoured for the investment of discretionary trust funds because, being structured as insurance policies, they produce no taxable income