After a transparency drive, is there hope for HNWs’ privacy, asks Spear's law columnist Ceris Gardner
We live in schizophrenic times. National and supranational initiatives across the world have introduced and intensified the exchange and even disclosure of our personal and financial information.
After FATCA in the US, the OECD’s Common Reporting Standard, and the EU’s Fourth Anti-Money Laundering Directive, which introduced the Register of Persons with Significant Control (PSC), now it’s the turn of English trusts. The Trusts Register, the effect of which we are beginning to feel as I write, will record the beneficiaries and assets of all taxable trusts. The disclosure is so inclusive that it includes even potential beneficiaries mentioned in letters of wishes (optional guidance to trustees), which are intended by design to be private.
Not only that, but even the names of individuals mentioned negatively in a letter of wishes (‘I’d rather my spendthrift brother doesn’t receive anything’) will have to be disclosed
to the taxman. This register, at least, will not be public. For now.
The government has also confirmed that the aspiration of David Cameron (remember him?) to create a ‘property register’ will be realised in the coming years. This will expand the PSC register to overseas companies that own property in the UK.
Overall, it’s not exactly a heartening trend for those who still value confidentiality. On the other hand, every business and charity in the land is bracing itself for the dreaded General Data Protection Regulation, coming in May, which introduces strict rules on the protection of consumers’ data and sets considerable penalties for those who do not comply.
While we may, as consumers, appreciate the additional data protection, call me cynical but it’s a little rich coming from the same people who brought us most of these registers. ‘You must divulge to us your most substantial assets,’ they seem to be saying, ‘but at least that charity will find it harder to pester you with emails.’
More reassuringly, whereas all Crown dependencies and overseas territories had agreed in 2016 to exchange beneficial ownership information with the UK following the introduction of the PSC register, the government’s push for the territories to make that information public has been voted down by the House of Lords. Public access is not necessary, the peers insisted, so long as information is shared with HMRC on request.
Meanwhile, in a welcome if rather bizarre development, HMRC has declared that it will not force UK trusts to register also with other EU states.
Finally, there are the Paradise Papers, information stolen from a Bermuda-based law firm and indiscriminately released by the media. This has fuelled popular prejudice against offshore structures, utilised in most cases for legitimate commercial reasons.
The law firm is now suing the BBC and the Guardian for publishing the illegally obtained information, in the hope of retrieving and assessing the documents so that it can inform
clients of the extent to which their confidentiality has been breached. There were concerns as to whether the case could risk further disclosure of clients’ affairs, but in a preliminary judgment the judge stated that it was unlikely to examine the banking arrangements disclosed by the documents or their tax implications and would consider instead whether the disclosure was sufficiently in the public interest to override any breach of confidence.
These limited victories for privacy may not do much to reassure those who do business in the UK, but the (self-serving, I confess) conclusion for now is that courts and lawyers can still be trusted to do what they can to keep private things private.
Ceris Gardner is a founding partner of Maurice Turnor Gardner and a winner of both the Spear’s and STEP Trusted Adviser awards