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Could new regulation spell the death of trusts?
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- Lemon Slice
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Could new regulation spell the death of trusts?
FT: Sat 18 Jan 2020: Could new regulation spell the death of trusts?
Huge shake-up of the rules in March will open trusts to intense scrutiny
This is as a result of the fifth Anti-Money Laundering Directive coming into play in March 2021.
FT has a paywall. FT: direct url: https://www.ft.com/content/fc22bb5f-133e-4bf9-8e1c-6dc7ad5aeb3e
Via google: https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=2ahUKEwiKsKip5Y_nAhWUqHEKHTcED6kQFjAAegQIAxAB&url=https%3A%2F%2Fwww.ft.com%2Fcontent%2Ffc22bb5f-133e-4bf9-8e1c-6dc7ad5aeb3e&usg=AOvVaw09ZtyDCR4vq_dZalbFN1bj
Or searching via Google to yield the article: https://www.google.co.uk/search?q=site%3Aft.com+regulation+death+trusts
The thing that concerns me is that if trusts for life insurance policies and pensions fall under the directive (both matters are raised in the article).
Huge shake-up of the rules in March will open trusts to intense scrutiny
This is as a result of the fifth Anti-Money Laundering Directive coming into play in March 2021.
FT has a paywall. FT: direct url: https://www.ft.com/content/fc22bb5f-133e-4bf9-8e1c-6dc7ad5aeb3e
Via google: https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=2ahUKEwiKsKip5Y_nAhWUqHEKHTcED6kQFjAAegQIAxAB&url=https%3A%2F%2Fwww.ft.com%2Fcontent%2Ffc22bb5f-133e-4bf9-8e1c-6dc7ad5aeb3e&usg=AOvVaw09ZtyDCR4vq_dZalbFN1bj
Or searching via Google to yield the article: https://www.google.co.uk/search?q=site%3Aft.com+regulation+death+trusts
The thing that concerns me is that if trusts for life insurance policies and pensions fall under the directive (both matters are raised in the article).
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- Lemon Half
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Re: Could new regulation spell the death of trusts?
Thanks, that'll take some studying.
We did touch upon the Register of Trusts over at Taxes some years back viewtopic.php?f=49&t=4401 and I'll cross-post to here from there.
We did touch upon the Register of Trusts over at Taxes some years back viewtopic.php?f=49&t=4401 and I'll cross-post to here from there.
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- Lemon Slice
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Re: Could new regulation spell the death of trusts?
I am a trustee of several small bare trusts held for children and grandchildren, holding equities and one of them holds national savings certificates. None of them pay any tax (the NSCs are tax free), and if there was any tax to pay, it would be paid by the beneficiaries, so HMRC is not interested in these trusts at the moment, and there is nothing to report. I don't know if this type of trust, of which there must be millions, is covered by the new regulations, and see no purpose in registering them, nor the insurance policies and pensions mentioned, as well as Will trusts. I'm hoping that the FT article is an exaggeration as a typical media scare story, and that the government will be able to stall until we are out of the EU and can safely ignore this bureaurocratic nonsense.
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- Lemon Slice
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Re: Could new regulation spell the death of trusts?
Parky wrote:I am a trustee of several small bare trusts held for children and grandchildren, holding equities and one of them holds national savings certificates. None of them pay any tax (the NSCs are tax free), and if there was any tax to pay, it would be paid by the beneficiaries, so HMRC is not interested in these trusts at the moment, and there is nothing to report. I don't know if this type of trust, of which there must be millions, is covered by the new regulations, and see no purpose in registering them, nor the insurance policies and pensions mentioned, as well as Will trusts. I'm hoping that the FT article is an exaggeration as a typical media scare story, and that the government will be able to stall until we are out of the EU and can safely ignore this bureaurocratic nonsense.
I think you have hit the nail on the head.
However, I fear the directive will get implemented whatever happens in the next few months, and unfortunately, a lot of people will unwittingly get caught up in it (e.g. on trusts for pensions and life insurance policies) as the legislation gets pushed through without any thought as there isn't the political will/time/insight to amend it.
The directive has a good intent, but a lot of people may get caught out by unintended consequenecs of the directive. I hope this does not turn out to be true.
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- Lemon Half
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Re: Could new regulation spell the death of trusts?
yorkshirelad1 wrote:[However, I fear the directive will get implemented whatever happens in the next few months, and unfortunately, a lot of people will unwittingly get caught up in it (e.g. on trusts for pensions and life insurance policies) as the legislation gets pushed through ...
Technical consultation: Fifth Money Laundering Directive and Trust Registration Service
Published 24 January 2020
https://www.gov.uk/government/consultations/technical-consultation-fifth-money-laundering-directive-and-trust-registration-service
Summary here https://ion.icaew.com/taxfaculty/b/weblog/posts/trust-registration-service-technical-consultation which mentions some of the points you have raised.
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- Lemon Slice
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Re: Could new regulation spell the death of trusts?
Parky wrote:I am a trustee of several small bare trusts held for children and grandchildren, holding equities and one of them holds national savings certificates. None of them pay any tax (the NSCs are tax free), and if there was any tax to pay, it would be paid by the beneficiaries, so HMRC is not interested in these trusts at the moment, and there is nothing to report. I don't know if this type of trust, of which there must be millions, is covered by the new regulations, and see no purpose in registering them, nor the insurance policies and pensions mentioned, as well as Will trusts. I'm hoping that the FT article is an exaggeration as a typical media scare story, and that the government will be able to stall until we are out of the EU and can safely ignore this bureaurocratic nonsense.
I think the challenge to HMRC is that there are probably any number of bare trusts where the beneficiaries should be paying tax as for example they are over the £12,500 income threshold but this does not happen because... well because either some people try to get away with things in life or indeed because some people don't fully appreciate the rules. If there's no mechanism for checks and balances, some people won't pay.
I suspect there's a particular issue when children get their first job but the trust is still running.
I don't see any particular issue with having a register as long as it's simple to use and only asks for appropriate information. If it brings in more tax I'm all in favour of it. I note from the HMRC guidance the proposed penalties for not registering in the first instance on time are very light and look like they would not be enforced as long as the Trustees are co-operative.
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- Lemon Quarter
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Re: Could new regulation spell the death of trusts?
The difference between a 'bare' trust and other trusts is that it is not a separate legal entity. There is no trust deed. The assets belong beneficially outright to the beneficiary but are held in someone else's name either for convenience or because they cannot be legally registered in the name of a minor.
I'm sure that brokers will be returning information on income etc held in this way directly to HMRC in the same way as they do for other accounts. So HMRC are likely to pursue any where the income substantially exceeds the tax free allowance.
When you open a bare trust account with a broker (eg Hargreaves Lansdown) they will designate the account as such and require a copy of the birth certificate before opening it.
I can't see any practical change being made except perhaps to require that the bare trustee is registered on a central list together with the name of the beneficiary.
I am trustee of several bare trusts, none of which had income over the personal allowance. However last year two of them did have income over 10k but below 12.5k. HMRC say you should complete a tax return if income exceeds £10,000. I wrote to the revenue explaining that income was over 10k but there was no tax liability and I would complete a return if they wanted one. I heard nothing more. I don't think they are interested!
I'm sure that brokers will be returning information on income etc held in this way directly to HMRC in the same way as they do for other accounts. So HMRC are likely to pursue any where the income substantially exceeds the tax free allowance.
When you open a bare trust account with a broker (eg Hargreaves Lansdown) they will designate the account as such and require a copy of the birth certificate before opening it.
I can't see any practical change being made except perhaps to require that the bare trustee is registered on a central list together with the name of the beneficiary.
I am trustee of several bare trusts, none of which had income over the personal allowance. However last year two of them did have income over 10k but below 12.5k. HMRC say you should complete a tax return if income exceeds £10,000. I wrote to the revenue explaining that income was over 10k but there was no tax liability and I would complete a return if they wanted one. I heard nothing more. I don't think they are interested!
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- Lemon Half
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Re: Could new regulation spell the death of trusts?
Gan020 wrote:I think the challenge to HMRC is that there are probably any number of bare trusts where the beneficiaries should be paying tax as for example they are over the £12,500 income threshold but this does not happen because...
In the second link above or below (dependent on your settings) it states:
As to bare trusts, the government will consider them in the light of representations as part of this consultation
The Technical Consultation itself states:
Trusts to be out of scope ...
3.13 Bare trusts often exist by way of a contract between a nominee and the person with a beneficial interest, as well as in many commercial situations. In line with international anti-money laundering standards, more information is needed to ascertain the risk of bare trusts being used for money laundering or terrorist financing purposes. The government will continue to consider this in light of further representations from affected groups as part of this consultation.
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- Lemon Slice
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Re: Could new regulation spell the death of trusts?
HMRC have updated their website on 24th January https://www.gov.uk/guidance/register-your-clients-trust
Bare trusts need not be registered.
Bare trusts need not be registered.
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- Lemon Half
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Re: Could new regulation spell the death of trusts?
Parky wrote:HMRC have updated their website on 24th January https://www.gov.uk/guidance/register-your-clients-trust
Bare trusts need not be registered.
That may have been there for a long time and might not be relevant to the Fifth Money Laundering Directive and Trust Registration Service which, as before, is under Technical consultation.
Using + show all updates as per your link only includes:
24 January 2020
The 'how to register' section has been updated.
Prior to then:
16 April 2019
The guidance has been updated to make it clearer who should register, when to register, what you'll need to register and what happens after you register.
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- Lemon Slice
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Re: Could new regulation spell the death of trusts?
P D - as always you have not taken it at face value, and delved into the detail. I guess we will just have to wait and see.
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- Lemon Slice
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Re: Could new regulation spell the death of trusts?
yorkshirelad1 wrote:FT: Sat 18 Jan 2020: Could new regulation spell the death of trusts?
Huge shake-up of the rules in March will open trusts to intense scrutiny
This is as a result of the fifth Anti-Money Laundering Directive coming into play in March 2021.
FT has a paywall. FT: direct url: https://www.ft.com/content/fc22bb5f-133e-4bf9-8e1c-6dc7ad5aeb3e
Via google: https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=2ahUKEwiKsKip5Y_nAhWUqHEKHTcED6kQFjAAegQIAxAB&url=https%3A%2F%2Fwww.ft.com%2Fcontent%2Ffc22bb5f-133e-4bf9-8e1c-6dc7ad5aeb3e&usg=AOvVaw09ZtyDCR4vq_dZalbFN1bj
Or searching via Google to yield the article: https://www.google.co.uk/search?q=site%3Aft.com+regulation+death+trusts
The thing that concerns me is that if trusts for life insurance policies and pensions fall under the directive (both matters are raised in the article).
Follow up, following the release of the consulation, on today's FT (Sat 1 Feb):
Relief for trustees over relaxation of new regulation
Direct url (paywalled): https://www.ft.com/content/b914ced8-6f23-4ca5-8fae-8b9a3947cc6c
via google: https://www.google.co.uk/search?q=site%3Aft.com+relief+for+trustees&oq=site%3Aft.com+relief+for+trustees
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