The directors and shareholders of private companies and the beneficiaries of trusts may be required to be named in a centrally-held, publicly-accessible register. In February 2014, the European Parliament passed a new Directive aimed at combating money laundering which may impact on trust law.
Under the laws of England and Wales, trusts are commonplace, whether they concern a trust fund set up by grandparents to fund a grandchild’s university education, or a trust that arises as a result of jointly-owned property.
The number of active trusts in the UK is believed to exceed 1.5 million. This can be directly contrasted with the EU as whole, where a lack of familiarity or understanding of trusts leads to a concern in other member states that the use of a trust is akin to a tax avoidance scheme and/or the deliberate attempt by an individual to conceal or hide their assets. It comes at a time where the EU is attempting to create a standardised set of regulations across a range of financial services products.
The current draft of the EU Directive includes provisions to protect privacy and to ensure that only limited information is published in the register. Someone looking to access the information will be required to register for the service and provide proof of their identity.
The UK Government has confirmed that it will object to clauses in the Directive that would force all trusts to identify their beneficiaries. Furthermore, it is unlikely that the size, location and nature of trust assets will be required to be disclosed.
It is too early to predict the impact that the Directive will have. There is concern that the new regulations may result in higher costs for investors and settlors of trusts, and the benefits of flexibility that trusts provide will be lost. The most vocal opposition to the proposed changes has come from the UK.
The responsibility for maintaining the register is likely to fall upon the relevant member state. However, before the process reaches that stage, the UK, as a member state, is required to pass legislation to adopt, or ‘ratify’ the Directive. Of course, by that stage, it is not entirely clear what the UK will look like.
With a referendum in Scotland due later this year, a general election next year, where one of the leading parties has promised a referendum on EU membership by 2017, the fact remains that this area of estate planning, looks set to be redefined. If you are concerned, it is worth seeking professional advice to find out how these changes may affect you and your situation.
Sam Jenner is a solicitor in the Trusts, Wills and Probate Unit. To contact Raworths telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate, HG1 1HF. Alternatively, you can email email@example.com