French Trust Register

(Alison Hill) #1

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?

Alison Hill
Ford Simey

(Nigel Scase) #2

I have administered a discretionary trust with French beneficiaries and after taking specialist advice we engaged another firm to deal with all the French reporting. The trust was brought to a close a few years ago but if my memory serves me correctly we had to file annual returns to the French Authorities and then a further return when the trust was brought to a close.

I was interested in your original post and the responses it would generate to see what the current position is.

Nigel Scase
Greene & Greene

(Peter Harris, Barrister, Overseas Chambers ) #3


Please give me a ring on 01534 625879 or e-mail

Peter Harris

(Nigel Scase) #4

Picking up this thread from July we are looking at an estate where the deceased died 2 weeks ago. When his wife died in 2003 a DOV was done to put in place a NRB Disc Trust with a charge of £150k linked to RPI taken over the property. He was a trustee along with one son and the appointed class included himself, his two sons and their remoter issue.

The second son lives in France and has done for some years so we believe. No distributions have been made but now that the husband has died the property will be sold and the charge repaid at which point it is likely the trust will be wound up

Like Alison’s original query no French Trust reporting has been done.

On looking at previous research into this it appears that the death of the client may need to be reported within 30 days as he is also a beneficiary notwithstanding what should have been reported on an annual basis

Any guidance as to the current position and what should be done to correct this would be appreciated. Do the French authorities enforce the large penalties?

Nigel Scase
Greene & Greene

(Peter Harris, Barrister, Overseas Chambers ) #5

Yes, the French authorities have been enforcing the penalties and do so to the hilt. These have been through the Constitutional Council.

However, assuming the property to be an immovable, I do have a solution involving ToLaTA if you wish to instruct me. It has been accepted by silence in the past, but the matter needs to be handled with a degree of discretion.

Peter Harris

(Peter Harris, Barrister, Overseas Chambers ) #6

I would suggest that you look at the effect of the 1963 Succession Duty Treaty as to the decease, not as to the lifetime obligations. There was no decease in France therefore no succession is opened there.
The succession duty Treaty might operate in these circumstances so as to remove the French receipts basis for the French resident son. The French administration appear to have accepted that.
The situation between the two jurisdictions is complex because there is a long history to it. It is against that backdrop that there may be a practical solution by reference to rules rather than the principle of art 792-01 bis I CGI which refers to a trust being defined as such by the laws of another State.
I would suggest caution here, but as to the succession duty issue, there may be less of a problem than your concern correctly has noted.

May I suggest that rather than become embroiled in the lifetime declaration issue that you simply consider treating the trust of land as land and therefore an immovable, as is permitted by English law, (re. Berchtold) and deal with the French issues on the basis that any interest enjoyed by the Father in the land terminated on his death, at nil value , and is no more and no less than an interest in land, as distinct from a trust as to movables. It would be wrong to consider that the definition in article 792-0 bis I CGI sits square with a trust of land. as opposed to a trust.

The French administration have simply gone very quiet when that is drawn to their attention, as contrary to their English counterparts they still respect the unwritten international convention that no State will attempt to legislate over the land of another state, and restrain the exercise of any administrative competence within that principle. I will not address the abolition of the doctrine of conversion in ToLaTA here, that would be for an opinion.

To cite a Scottish civil law anti-heroine, one has to stick one’s courage to the sticking place, which here fortunately can be legally circumscribed.

Peter Harris