Extension of Trust Registration Service could risk UK competitiveness and beneficiary privacy
21 February 2020: ICAEW’s Tax Faculty and Business Law committee have raised concerns over proposals to extend the Trust Regulation Service to non-UK trusts who enter into a business relationship with UK obliged entities and those that would force trusts to disclose data to third parties.
In its response to the government’s technical consultation on the extension of the Trust Registration Service (TRS), ICAEW argues that the broader scope of registration for non-UK trusts “not only seriously damages the competitiveness of the UK accountancy profession and others, it could also have a detrimental effect on correct tax compliance”.
“Non-UK trustees may be deterred from appointing UK advisers to provide UK tax services, for fear of having beneficial ownership information publicly disclosed.”
The government’s proposals extend the registration requirements of the TRS to most UK express trusts, whether or not they have a tax liability, as well as catching overseas trusts who enter into a business relationship with UK professionals.
ICAEW responded to the government’s consultation on 21 February 2020, in ICAEW REP 04/20, and welcomes efforts to narrow the scope of express trusts required to register under the extended TRS. However, it concludes that there are other trusts that warrant exclusion from registration, including: trusts set up under wills; insurance policies that pay out otherwise than on death or critical illness; and small charities.
The money laundering and terrorist financing risks of different kinds of bare trusts also needs to be considered further, says ICAEW, so that a disproportionate administrative burden is not imposed on low-risk family arrangements. Furthermore, additional clarity is needed on what types of employment-related trusts and trusts used for joint holding of property will be exempt from registration.
ICAEW also raises concerns about the loss of privacy for trust beneficiaries that will result from disclosure of data to third parties under ‘legitimate interest’ provisions. “The appropriate organisations to be undertaking investigations into suspected illicit activity are the relevant law enforcement agencies, not journalists or campaigners,” it states.
ICAEW acknowledges the government’s intent to protect vulnerable beneficiaries and those at risk of harm from having their data disclosed, but states that it has “serious concerns with how such protection will be afforded in practice, and how government will be aware on a real time basis if individuals are at risk of kidnap, harassment and fraud”.
- Read ICAEW’s response in full.
- See more on the taxation of Trusts