The European Parliament is to vote on Thursday (13 February) on a proposal to introduce a public register of the owners and beneficiaries of all European Union (EU) companies, including trusts. If passed, this could lead to families having to reveal the details of all their financial affairs which are kept in trusts.
The proposals are designed to crack down on money laundering and tax evasion. They were originally intended to make off-shore companies more transparent, and were promoted by the British Prime Minister, David Cameron, while the UK held the Chairmanship of the G8 in 2013. But, with a certain bitter irony, the proposals as they are being put to the European Parliament this week are not being welcomed in Britain.
The reason for this is that trusts are much more common in the UK and in the Republic of Ireland than they are in other parts of the EU. And when Mr Cameron proposed a register, he did not intend that it include trusts. The feeling in the UK is that there is already sufficient regulation in place to oversee trusts; indeed, there has recently been a tightening of the rules to try to ensure that trusts are not used illegally for tax avoidance (see www.orcap5.wpengine.com, Money in Trusts: The Tax Question, 31 Jan 2014).
A vehement critic of the EU proposals is Mark Field, Conservative MP for the Cities of London and Westminster. He said, “Many people assume that trusts in the UK are used almost exclusively by wealthy families, often as a means of avoiding tax. But this is a misconception which, unless challenged, risks exposing to public view the private financial affairs of countless ordinary British families.
“Trusts are part of everyday life in the UK — so much so that we often do not even notice them. Though they may not realise it, any couple that owns a home, has a will and life assurance will probably have several trusts.
“While the concept of trusts is almost unknown across much of the EU, there are millions in existence here. Most are very low risk from a money-laundering point of view.”
Mr Field went on to warn against the huge bureaucracy which would be needed to manage a register which would have to oversee millions of family trusts. And in the current climate where many Britons have lost faith in the EU, another threat of increased bureaucracy from Brussels could play into the hands of those in favour of Britain leaving the EU altogether.
