I advise trustees of a very small discretionary trust. There are 2 potential beneficiaries who are French nationals amongst the many potential beneficiaries who are UK citizens.
After making the only distributions in 2011 (before the introduction of the French Trust Register) the trustees retained limited funds (investments with an investment manager) against possible liabilities. We now believe the retention will not be required for that purpose.
This trust has not had to be registered on the UK Trust Register as yet as no tax liability has arisen since the introduction of the register as a result of the nature of the investments and the size of the fund.
If satisfied there could be no other liabilities, the Trustees are likely to make final distributions within the next 12 months Having regard to all the circumstances of the various beneficiaries the trustees are likely to exercise their discretion in favour of a particular UK beneficiary.
I am concerned about the French Trust Register. No steps have been taken to register the trust on the French Register. There would have been no liability on any French beneficiaries since the inception of the register. I have found nothing to suggest the French Trust Register has a de minimis level before registration arises. The penalties for non-registration appear entirely disproportionate especially when there can be no tax liability on a French citizen.
I have read past postings and note there have been many issues since the French Trust Register was first introduced and that it may not now be necessary to register an annual return in circumstances such as these.
It seems that the termination of the trust may need to be registered on the French register although I am not clear if that would be the case if no distribution is made to a French resident.
If the trustees exercise their discretion in favour of the particular UK beneficiary is there any need to register the trust now or any prospect of being subject to penalties from the French tax authorities as a result of not registering the trust for the past periods?