Given the information which is to be made available on the Register, to our foreign friends, one has to prepare oneself for an onslaught of trust anti-avoidance and deeming provisions being introduced abroad in addition to their legislations in place, by jurisdictions seeking to encroach upon what is technically a UK taxing jurisdiction and, which should remain so. Certainly post-Brexit
The concept of “dominion” as a form of retained possessory concept of ownership has been bandied about in Switzerland in divorce cases in relation to settlors, with or without reserved powers. That might be a convenient deeming hook for a foreign jurisdiction to abusively hang the information available on the HMRC database.
The next stage on the OECD agenda is the inter jurisdictional attiribution of assets and the rights to tax them by reference to OECD principles, such as residence, but not to the legal points that define them.
Hence the over insistence upon information as to settlors, protectors, legal / tax advisers etc.
What is clear is that each trustee will now have to keep very careful records of what has been declared to HMRC and when, so as to be able to defend themselves against claims from beneficiaries or settlors, and what is more to be able to explain to foreign tax administrations exactly what has been declared, and what might be an unwarranted assumption by the foreign observer.
Whilst for the moment there is a degree of confidentiality whether at common law or otherwise expected from HMRC, that duty will not extend as its stands to other tax administrations who might not care less about who might receive the information, and who may even be able to hide behind statutory defences to release the information and not be liable for so doing.
Note that for example, the French tax administration can freely exchange or swap information obtained with other parts of the Government administration which may not be bound by duties of confidentiality,
The information registered means one or more things here. It may bear entirely different “meanings” once in the system.
For example, the specific naming of members of a discretionary class, despite the fact that they may have no hope of any benefit in the future, could lead a French tax inspector hanging the fiscal albatross of the entire trust fund around the neck of an unfortunate French resident member of that class. Whilst that application of the law was technically unconstitutional under basic French constitutional theory, no French politician took up that cudgel when the 2011 legislation went through for fear of being consigned to oblivion in the next election. and it is only recently that a Parisian firm has started to erode the current administrative approach on its unconstitutionality
That is why the Forum’s and HMRC’s approach to open and closed discretionary classes is of fundamental importance, and will necessarily entail a rethinking of the drafting of many discretionary classes.
Peter Harris
www.overseaschambers.com