At the outset, it was thought that we would have a soft Brexit if the Prime Minister who succeeded David Cameron was in the Remain camp. However, given the stance being taken on placing limitations on migration to the UK, it can now be seen that it will be a hard Brexit. Although Boris Johnson, during the Referendum campaign, saw Britain as a Singapore to Europe but it is unlikely this will actually happen. Many practitioners who deal with international families fear these families will leave London. Already we see applications for passports from countries which will remain in the EU so that they can easily move away from the UK.
From a Private Client perspective, many of the recent legislation changes will remain unaffected by Brexit. In particular, Brexit is irrelevant for FATCA and the AEIO so this type of legislation will still apply meaning that the UK will continue to exchange tax information on their nations with other countries. Also, the EU Succession directive (see Susan Bateson’s article on this important piece of legislation) will continue to apply once we leave the EU as the UK never signed up to it and so has always been treated as a non-member state. It is therefore anticipated that this legislation will continue to govern assets held by UK nationals in EU countries.
Some investment managers are worried about London’s status once Brexit occurs. If we cannot get professional services into the Single Market as part of the Brexit negotiations, many banks and investment managers potentially could go offshore and London will lose its status as a financial centre. In negotiating entry into the free market no one has negotiated professional services before – only trade – so in this way we are forging a path into the unknown. Further, there is a perception that the EU is very wary of non EU financial centres so there will be no moderating voice in the EU from the UK. It is highly likely the Anti Money Laundering Fourth directive will be revised after the Panama papers scandal and we will have limited opportunity to contribute to this.
It is notable that within three days of the result of the referendum being announced, the EU issued a directive regarded as very hostile to the UK which implements a register of beneficial owners of trusts. We have already seen companies having to disclose beneficial ownership with the register of significant interests. France implemented such a register in 2013 and made it available on the internet from July this year and this led to a recent challenge by a beneficiary in the French Courts that such a step is a breach of the right to respect for private life. However, the tide is turning in respect of the privacy of trust arrangements and on 1 April 2017 New Zealand will introduce the compulsory register of foreign trusts. New foreign trusts will have to register on establishment and will have to submit annual reports. Existing trusts will be required to register and supply information by 30 June 2017.
Originally it was proposed the new trust register for the UK would distinguish business orientated trusts from other trusts. A business orientated trust is one which holds shares in a private company and it was proposed that such trusts would be treated like a company and any member of the public will be able to search that part of the register. Non Business orientated trusts on the register would only be able to be searched by people with legitimate interests such as HMRC and other government bodies. It is difficult at the moment to predict what the final legislation will be but it is likely that if the UK wants access to the Single Market then they will have to agree to implement a Trusts’ Register and trusts will not be the private arrangements they currently are.
For further information relating to the points raised in this article, please contact Amanda Simmonds, Senior Associate.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.