Legal Entity Identifier and Trusts

Trusts Discussion
1

We have had a letter from a firm of Stockbrokers stating that, due to new set of EU regulations (Markets in Financial Instruments Directive II), in order for them to continue to deal or transact on behalf of the trustees managing the trust funds, the Trust needs an LEI code. They state this comes into effect in January 2018.

I have heard absolutely nothing about this. I have spoken to one or two other stockbrokers we use and they have no knowledge of theses regulations either.

I don’t doubt the information we have received is correct but, as with FATCA and CRS, I would like some guidance on this and wonder when we can expect some information.

Julie Bullough
Coupe Bradbury

2

A Legal Entity Identifier (LEI) is another “tool” to help prevent money-laundering, etc.

With effect from January 2018, I understand an entity will require an LEI to undertake any financial transaction. I believe this will also apply to your late Aunt Agatha’s executors selling her handful of shares in Lloyds Bank.

I understand “Entity” includes not just a corporate entity but also individual trusts and estates.

It is similar in effect to the identification and verification process for an individual, except that once the legal entity has an LEI, it only needs to quote it to any relevant service provider, rather than go through the whole process ever time.

When applying for an LEI, the “entity” needs to be able to refer to a source to confirm its identity. With companies, this can be straightforward – they are all registered at Companies House. However, with trusts there has been a lot of discussion, as there is no central record of trusts.

It has been suggested that where trust returns are made to HMRC, the UTR (unique taxpayer reference) will help enable the issue of an LEI, but I am not sure how far that discussion has progressed (or if every trust and estate actually has a UTR).

If there is a corporate trustee, I understand it will be possible for that trustee to obtain an LEI for its trusts more efficiently than for a trust with individual trustees.

Within the UK, an LEI is issued by The London Stock Exchange. There is a set-up fee and an annual fee.

It is good to know that at least some stockbrokers are warning their clients of the need for an LEI, rather than leaving it until the last moment.

Paul Saunders

3

Paul

Thanks for this information

You can bet your bottom $ that not every trust and estate that holds
investments has a UTR!

Andrew M Mortimer

4

Thanks Paul. I am reading conflicting information about whether an LEI is required for all investments i.e. bonds, collectives, or, just directly held equities. Are you able to clarify this point?
Julie Bullough
Coupe Bradbury

5

Using search engines takes you mostly to sites that will tell you how to get an LEI, or the history of their development.

Other than Deutsche Bank, most sites refer to “financial transactions”. The Deutsche web site refers to dealings in “financial instruments”. This could still mean almost anything (but would at least appear to exclude bank accounts, hopefully).

I hope professional bodies are able to offer guidance to their members in good time to enable any necessary registrations to be completed before the year end (I suspect there may be a year-end rush as affected practitioners put it off until they have the time to understand and deal with it!).

As the “issuer” of LEIs for the UK, one could hope The London Stock Exchange will issue a “Dummies” guide to LEIs to assist those who might be affected to understand who needs one, and why (and not just the cost).

Paul Saunders

6

There is a STEP blog about this and a link to the stock exchange form needed.

Simon Northcott

7

This is a blog that STEP posted last month and we hope to publish more information in due course. I hope it assists in the meantime.

Emily Deane
Technical Counsel, STEP

8

I have been asked by Lloyds Private Banking to request an LEI for the trust for which I am a trustee. I am embarking on doing this through the London Stock Exchange’s portal. However, as an ordinary trustee the various fields I am being asked to complete are mystifying and the drop down options make very little sense to me in the context of a Discretionary Will Trust.

Does anyone happen to know if there is a good guide available online to this process of requesting an LEI specifically for a trust? Thanks in advance for any enlightenment you can offer.

Mazzy Fautley
Geoffrey Masurel Trust

9

I used LEI Registrations. They were very efficient and obtained an LEI for my trust very quickly.

Hugh Fordham

10

I have had to call the LSEG helpline a couple of times re some trusts I’m helping to obtain LEIs and they have been very helpful (including sending me samples of how to fill in the application forms for trusts).

Caroline Cummings
KPMG

11

I’ve tried to use both LSEG (thro’ UnaVista) and EQS (which seems a bit cheaper) - but to no avail after what seems to be hours of graft!

No real thought seems to have gone into handling Trusts.

I’d appreciate anything you are able to pass on in the way of samples

Thanks

Ken Smalldon

12

Have you tried emailing the enquiry address - they are responsive and helpful.

James Dickens
Grierson Dickens Ltd

13

Thanks for all the above, folks. Very useful.

I too found out about LEI through a stockbroker mentioning it when writing me on another compliance matter. I am a trustee of discretionary trusts (both with UTRs, both with online hmrc SA account for paying tax). Both are “small”, one is being wound up so will not be affected by LEI. Stockbroker laughingly described LEI charge as “small”.

I wish to state the obvious. I suspect you are all aware and too polite to state it. The LEI is a rip-off for any “entity” (such as a discretionary trust) where the total assets are “small”. Why is there not a minimum size cut off whereby “small” entities are not required to have an LEI? Say £1m. Or £500,000. Or £250,000 would be more than adequate for me. Even the ill conceived and abandoned probate fees alteration proposals admitted it was wrong to charge “small” estates a probate fee. Charging £115 + VAT (and I get no benefit for the VAT) and then £90 + VAT per annum is a rip-off. It is a disgrace and it is picking on trustees.

And what is LEI for? Supposedly to ensure global financial system stability. So how is a trustee selling £7k worth of UK listed stock a year possibly going to destabilise the global financial system? I should not pay for other people’s inabilities to play by the rules. Along with online TRS (another debacle) the LEI seems to be deliberately aimed at stopping trustees from being trustees. And if professionals have to administer LEI and TRS for slightly larger clients, those clients will be put off as well, because it just ain’t worth the candle.

It appears to me that LEI will be required for any transaction on a stock exchange. So, to answer some points above, one way around LEI would be for trustees to restructure collective trust assets (where possible) so that they are OEICS held directly with the fund manager. Trustee (or practitioner acting for trustee) then deals with fund manager via telephone/online directly and fund manager buys/sells OEIC shares at a forward price with no stock exchange involved. At least that is how I see it: I thoroughly accept you may know better than me and know why this will not work.

I have emailed LSE complaining about the rip-off (£115 for a number?) nature of LEI and not had a reply. What a surprise. And I can only purchase an LEI through LSE. If I want to trade infrequently (say once every three years) that is a £115 + VAT charge every year I trade. Not acceptable. Government should be encouraging people to take risk and teaching people how to be responsible for their own financial futures: instead costs and impediments are increasingly put in the individual’s and trustee’s way, discouraging them from taking control of their own financial futures. What is wrong with hanging criminals rather than creating unacceptable impediments to the law abiding classes, such as trustees?

“Money laundering” and other such excuses are red herrings. It wasn’t ME who got fined hundreds of millions or billions for gun running, drug smuggling, libor fixing, PPI miss-selling and others: IT WAS THE BANKS. So why do I have to pay for a number (I have no problem with being identified by any bona fide authority) to protect the stability of the global financial system when I am clearly not a threat to the stability of the global financial system?

I thought a “small” charge would be a one-off charge in region of £5.

Any input gratefully received.

tmbrian (angry trustee)

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14

I totally agree with Brian and thought I would put in my two-penneth worth having been advised by our Stockbrokers that registering a LEI is now required.

I am a trustee of a small charitable trust with around £39,000 invested and annual investment income of around £1,000 per year, which after paying our Stockbrokers £180 per year is added to donations of around £5,000 received during the year and it is all given to charity.

Again this is one of those silly ideas dreamed up some European bureaucrats who have not thought things through and perhaps another reason why we are leaving the EU. We are now to be charged £138 to register a LEI and I gather a further £108 per year to renew. I am not sure why it should costs so much and perhaps the subject of another debate, but as a registered charity, this is so wrong and in our case, this annual charge is a material amount coming from the pot from which we donate to charity.

I had thought of writing to my MP, but as with all politicians, his interests lie elsewhere. However, I should be grateful to learn why as a small registered charity we should require a LEI and what is the purpose of a trust such as we requiring a LEI just so we can do the odd transaction once a year or so!

simon woolf

15

With regard to the 2017,18 tax return does anyone have a view as to whether the LEI registration cost incurred can be charged wholly to/offset against taxable income as a TME in a discretionary trust where beneficiaries are both income and capital beneficiaries but where there is no chargeable capital gain in that year

Hugh Fordham

16

Hi Hugh - have been off this forum for a few years. I am back on now looking for some suggestions in another area and thought I would respond to people who have posted on same threads as myself. I do not have professional qualifications and I am neither authorised nor qualified to give advice.
However I do have a lot of practical trustee experience and I would strongly think that any LEI registration cost in any given tax year can be offset against taxable income in that year as a TME in a discretionary trust where beneficiaries are both income and capital beneficiaries (but no chargeable gain)
My view is that, in effect, the LEI cost is tax deductible. It appears to me that this is precisely the type of cost that TME rules are designed to encompass. But I may be very wrong, and I am sure you will have found the answer elsewhere.

And Realtigger is emphasising the issue regards LEIs. If you are trustee of a small discretionary trust (whether charity or family orientated) how come you have to pay an LEI? No-one is casting doubt on the veracity or legality of the trustee. Trustee has the skills, patience, knowledge, attitude and legality to have been chosen as a principal acting trustee or a lead trustee. They are demonstrably an “appropriate person” to do the job. Yet the trust they represent has an LEI charge each year. Why? I have seen no valid reason given for charging LEI costs to trustees of small trusts who could not disrupt financial markest even if they wanted to.

tmbrian

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