I look after a newly established discretionary trust with one UK rental property and a UK bank account. Settlor, trustees and beneficiaries all UK resident. Usual classes of beneficiary including widow, named adult (middle aged) children, and remoter issue (not named in the trust deed), their spouses, etc. No distributions have been made from the trust yet, and are unlikely to be until next tax year.
The bank has asked them to complete an Entity Self Certification form for AEOI purposes. The form asks for all controlling persons which I understand for CRS includes all beneficiaries as well as the settlor and trustees.
My questions are:
Do I need to list all living beneficiaries who fall within the remoter issue class (some are still minors) or do I just list the ones named in the trust deed and refer to the fact that there are other potential beneficiaries who fall into the class of remoter issue.
If distributions are subsequently made to some of the remoter issue do the trustees need to tell the bank and give their details even though there is no CRS reporting to do as all parties are UK resident?
If the trustees do give a full list including all living remoter issue, is there a problem under GDPR? I am not happy about giving away people’s details when there is no CRS reporting requirement.
If a beneficiary gets married, their spouse will join the class of beneficiaries. Do the trustees need to tell the bank?
I should be very grateful to hear people’s experience on this. Having spoken to some of my trust contacts its seems that many have not had to look at this, even where a bank account is held (and indeed in my many years of trust work I have not had to complete one of these before).
In my experience different banks have differing requirements - there does not seem to be a standard and as you note, it is largely academic since the trust, settlor and beneficiaries are all UK tax resident.
Once that fact is made clear and UTRs/NINOs for the ‘controlling parties’ are provided a lot of the rest falls away. I usually only include details for individuals named in the trust Deed such as the settlor, trustees and named IIP beneficiaries. Where there is discretion I would only refer to those beneficiaries that have actually received any income as discretionary beneficiaries don’t really control the trust in the same way that IIP beneficiaries do. Thus your query about a member of the class of beneficiary getting married seems too remote to mention to the bank, until and unless it arises and the bank has requested an updated self-certificate. I have also found that several banks regularly manage to lose these internally and ‘demand’ they be recompleted, so keep a copy and proof of when and to whom you returned it.
Maxine
I must confess that I know very little about AEOI procedures, though I ought to! Fortunately I haven’t had to act in a case where I would’ve needed to investigate the matter. However having googled the matter, I have found a questionnaire which CAF bank requires where an account needs to be opened and AEOI is relevant. I have pasted below a section which I think may answer your query at least in part. I would however just comment that I find it odd that the discretionary beneficiaries of a trust can be included as controlling persons. It just does not make sense but then nothing makes sense these days when you dig into these sort of things. Perhaps some more knowledgeable contributor will tell me why.
“Controlling Person(s)’ are the natural person(s) who exercise control over an entity. Where that entity is treated as a Passive Non-Financial Entity (‘Passive NFE’) then a Financial Institution is required to determine whether such Controlling Persons are Reportable Persons. This definition corresponds to the term ‘beneficial owner’ as described in Recommendation 10 and the Interpretative Note on Recommendation 10
of the Financial Action Task Force Recommendations (as adopted in February 2012 I have to confess that I know a little about the procedures but having googled, I have found the following on a form which CAF bank requires completed to comply with AEOI requirements.
In the case of a trust, the Controlling Person(s) are the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies)
or class(es) of beneficiaries, or any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership). Under the AEOI
the settlor(s), the trustee(s), the protector(s) (if any), and the beneficiary(ies) or class(es) of beneficiaries, must always be treated as Controlling Persons of a trust, regardless of whether or not any of them exercises control over the activities of the trust.”
My posting has somehow got mixed up and should have read:-
I must confess that I know very little about AEOI procedures, though I ought to! Fortunately I haven’t had to act in a case where I would’ve needed to investigate the matter. However having googled the matter, I have found a questionnaire which CAF bank requires where an account needs to be opened and AEOI is relevant. I have pasted below a section which I think may answer your query at least in part. I would however just comment that I find it odd that the discretionary beneficiaries of a trust can be included as controlling persons. It just does not make sense but then nothing makes sense these days when you dig into these sort of things. Perhaps some more knowledgeable contributor will tell me why.
“Controlling Person(s)’ are the natural person(s) who exercise control over an entity. Where that entity is treated as a Passive Non-Financial Entity (‘Passive NFE’) then a Financial Institution is required to determine whether such Controlling Persons are Reportable Persons. This definition corresponds to the term ‘beneficial owner’ as described in Recommendation 10 and the Interpretative Note on Recommendation 10
of the Financial Action Task Force Recommendations (as adopted in February 2012 in the case of a trust, the Controlling Person(s) are the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies)
or class(es) of beneficiaries, or any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership). Under the AEOI
the settlor(s), the trustee(s), the protector(s) (if any), and the beneficiary(ies) or class(es) of beneficiaries, must always be treated as Controlling Persons of a trust, regardless of whether or not any of them exercises control over the activities of the trust.”
Thank you for this. I too find it odd, in fact non-sensical, that discretionary beneficiaries are seen as controllers, but that does seem to be the case for CRS. This is the problem when someone makes laws that don’t fit our context. I had hoped that Brexit might bring some good news in this regard, but not yet (and I realise there are bigger issues to deal with at the moment)!
The wording you have found is very helpful thank you in that it refers to classes of beneficiaries. Everything else I have found just refers to beneficiaries. I think therefore I will complete the form with references to named beneficiaries, and the classes only for the others (none have received distributions yet).
Thank you for this. Based on your and Patrick’s comments, for beneficiaries I am just going to show the named ones and for the rest refer to the classes (as none have yet had distributions). I think I will also say to the bank that we will only update the details if any of the beneficiaries etc becomes non-resident, given that CRS reporting is only relevant where there are overseas controlling parties. This will mean we have been quite clear that we will not be providing names of UK resident beneficiaries initially referred to by their class just because they have subsequently received a distribution. Then if the bank want regular updates they can ask for them.
Thank you also for the heads up about the banks losing the forms. Interestingly the bank concerned did lose all the client information initially provided so the client had to provide everything again. Doesn’t bode well.