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Private client community divided by public disclosure plans

by Eleanor Lawrie on Jun 11, 2014 at 07:00

Private client community divided by public disclosure plans

Plans to make public the key beneficial owners of companies, trusts and limited liability partnerships have accelerated recently, with the government pledging to bring in legislation ‘as soon as possible’.

The initiative, first unveiled at the G8 summit last year, forms part of global efforts to crack down on tax evasion, and the UK government was vocal about stopping its citizens from using shadowy ‘shell companies’ for money laundering.

These structures are often very complex and make it almost impossible for HM Revenue & Customs to know who the ultimate owners are, and thus whether they are liable to pay tax.

The scheme will be implemented via a central register, which will require companies to disclose the details of individuals who own more than 25% of shares or voting rights and who are the true beneficiaries of the structure.

In mainland UK, this register is already being set up, and prime minister David Cameron (pictured) recently wrote to the overseas territories, including key banking hubs such as Jersey, the Isle of Man and the Cayman Islands, requesting they create a similar arrangement if they have not already done so.

‘I am firmly of the view that making company beneficial ownership information open to the public is by far the best approach. It will give businesses and individuals a clearer picture of who ultimately owns and controls the companies they are dealing with, and make it easier for banks, lawyers and others to conduct due diligence on their customers,’ he said.

Alan Binnington is president of the Jersey Association of Trust Companies and a private client director at RBC Wealth Management. He agrees it is necessary for service providers to provide details of companies and trust structures but questions how useful it will prove to make these publicly available.

‘If the UK does end up with a register of beneficial ownership, the information is likely to be of dubious value because the people that actually administer companies in the UK are not regulated. Therefore there is no check on the quality of the information being captured,’ he said.

Data protection clash

John Barrass, deputy chief executive of the Wealth Management Association, stressed that while we don’t yet know what the exact wording of the legislation may be, there could be questions raised about putting this information in the public domain, not least a potential conflict with the Data Protection Act.

‘There is a drive to get a register that is properly ring-fenced, and the concern is getting the right balance. The data protection side of this requires privacy about the information that risks being released in the share register. We need to make sure this law does not come into conflict with another law.’

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