Expats are among millions of Britons who may have to provide confidential financial information held by trusts on a public register if a proposed bill is passed by European lawmakers.
The bill is aimed at stopping corporate money-laundering, but will also force trusts to disclose private financial arrangements, according to British MP Mark Field.
Field, who represents City of London and Westminster, claims the ramifications of the bill could mean millions of families will have to hand over accounts for trusts listing bank account details, investments, property holdings and the details of any bequests under wills.
The issue would affect British expats and families, but would have little effect on other European Union nations as trusts are not widely used by other states in Europe.
The draft bill is still under discussion in the European Parliament and is subject to amendment.
Prime Minister steps into row
Prime Minister David Cameron has voiced his concerns over the possible costs of preparing trust accounts and stripping away of financial confidentiality for private citizens if the bill goes ahead in its present form.
Even common financial transactions, like joint ownership of a house, would come under the law.
Land Registry transfer documents routinely include a trust between joint owners which lays out their share of ownership.
Lawyers argue that the European view of a trust implies tax avoidance, but trusts drawn up in Britain oblige trustees to report any income or gains to HM Revenue & Customs (HMRC).
Also, in Britain, trusts are widely used for estate planning to keep details of family finances private because the contents of wills are published for public information.
Protecting the vulnerable
“The rest of Europe fails to understand that trusts underlie many common legal and financial transactions in Britain and that most people do not even know they are involved in a trust,” said Field.
“Any couple owning a home, anyone with a will and anyone with life insurance is likely to have several trusts.”
Field also argues that, according to HMRC figures, 25% of trusts in Britain are set up to protect vulnerable people – like children under 18 or the elderly – and not as tax avoidance vehicles.
“If parents, grandparents or relatives set aside money to help a vulnerable child, should this arrangement be paraded on a compulsory public register? Transparency is in the public interest, but opening up private family financial issues for scrutiny is not,” said Field.