UK demands exemption from EU trust registry plan
Both the UK Prime Minister and HM Treasury Minister David Gauke have previously indicated that they would not welcome an open registry of trust beneficiaries, because trusts are used for purely private purposes far more under UK common law than they are in civil-law jurisdictions. The original draft Fourth Money Laundering Directive did not require public registries of trusts, but the clauses were inserted into the draft just before it went to a vote at the European Parliament on 20 February. They were overwhelmingly approved by MEPs, making it politically difficult for the UK to try to block the measures at Council of Ministers level later this year.
However, the UK government is not giving up. Its position was set out in a House of Lords debate by Treasury spokesman Lord Newby last week – that it welcomes mandatory public central registries of company beneficial ownership, but not of trusts in general.
'The government opposes the mandatory registration requirement for trusts [which] unlike companies are used for a range of purposes, such as benevolence, inheritance, protecting vulnerable people and family support', noted Newby. 'As such, the implications for privacy are far greater, and trusts therefore warrant different treatment ... We consider registration of trusts to be a disproportionate approach and, in particular, one which undermines the common-law basis of trusts in the UK.'
As a compromise, the UK government intends to get the Fourth Money Laundering Directive obligations restricted to trusts that hold financial assets – which would specifically exclude, for example, will trusts. 'We want to ensure that, as far as possible, information about trusts that could be problematic for money-laundering purposes will be more generally available,' said Newby. 'Our proposals would do that in respect of the UK without having a full mandatory register in the same way as we propose for companies.'
The Treasury is now negotiating with the EU Council presidency and other member states to agree a compromise that would limit the scope of obligations on trusts to those holding financial assets, which the UK would satisfy through existing reporting obligations for trusts holding financial assets, domestic reporting requirements and automatic exchange of tax information agreements. But given the tense negotiations over beneficial ownership during the Fourth Money Laundering Directive discussions, success is by no means assured even if the EU Council is persuaded to accept the UK position. That will be decided by a qualified majority vote.
'We are under no illusions about the challenges ahead,' said Newby. 'Negotiations to reach a mutually agreed final text with the European Parliament are likely to be challenging'.
Filippo Noseda, co-head of wealth planning at Withers, said it was 'encouraging' that HM Treasury had acknowledged that the proposed trust registry measure was not proportionate. 'The question is whether there is the political will to take this debate further, and push back on the general position in support of the trust registers adopted by most EU member states,' he told STEP.
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