The latest twist in the tale concerning the introduction of public registers of trusts in every EU country is that the UK is seeking to negotiate amendments to the proposals. This will come to a relief to many in the estate planning industry and those who have set up trusts in the UK, but there is still a way to go.

On 11 March 2014, the European Parliament voted to include trusts within the transparency provisions of the Fourth Money Laundering Directive. The transparency provisions include each EU country having to create and maintain a public register of all trusts, putting on public record the identity of the trustees, settlor, protector, and any beneficiary with an interest in 25% or more of the trust's capital. Name, date of birth and nationality will all have to be disclosed. If the trust is discretionary, such that no one beneficiary owns a 25% share, we understand that the beneficiaries must be disclosed as a class.

The transparency provisions were originally introduced with the aim of establishing public registers of company beneficial ownership in every EU country, but trusts were added as a result of a vote in the European Parliament on 20 February and the addition has been overwhelmingly supported by other member states.

At present in the UK, there is no such public register, and trusts are confidential to those that create them and are involved with them. With large family trusts in particular, this type of information is highly sensitive and private, and such a register is bound to be seen as an unnecessary invasion of privacy.

The driving force behind the plans is the counteraction of tax avoidance. The UK is one of very few countries in the EU that uses trusts, and the rest of the EU views them with suspicion as vehicles for tax avoidance and money laundering, which is in fact rarely the case.

Although the UK government had previously gone on record to say that it did not support the same approach to transparency for trusts as it does for companies, it was not until last week that their opposition to the EU's plans was made clearer. In a debate in the House of Lords, a Treasury spokesman confirmed that the government recognises the value of trusts in the UK for a whole range of legitimate purposes and that trusts "warrant different treatment" in terms of privacy, to companies. Having public registers of trusts in the UK was described as a "disproportionate approach" to the perceived problem, and the government is seeking to negotiate amendments to the draft Directive to restrict registers to trusts with "financial assets" only. This should remove many family trusts from the scope of the Directive; further, the government is hoping that the transparency requirements for those trusts with "financial assets" can be dealt with through the UK's existing trust reporting obligations and automatic tax information exchange agreements.

The government is taking these proposals to the EU Council presidency and individual member states in an effort to win support, but concedes that it may be "challenging" to get the amendments through.

We will continue to track the negotiations on the Directive and the impact it may have on our clients' trusts. 

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