Is the clock ticking for trusts?

Are trusts a thing of the past or can they adapt and thrive in the new international finance landscape? This was the topic for debate at the recent BL Guernsey Trusts Conference, and the subject of the first panel event featuring lawyers from Walkers and Mourant Ozannes alongside senior tax manager Paul Beale of KPMG.
 
Alison Ozanne, a partner at Walkers, opened the conference by noting that recent years have been challenging for those in the trust sector, particularly smaller firms feeling the pressure of regulators and either ”being taken down the enforcement route or merging with larger businesses”, she said.
 
In the wake of the “Panama Papers”, or BEPS, Ozanne asked, would trusts continue to be as popular as before.
 
Certainly the “Panama Papers” furore was widely discussed in the media, but we have not observed a dampened enthusiasm for trust-based wealth management. Indeed Ozanne agrees: “Was it really all that exciting? A few trusts set up in the eighties that would not meet regulations now? The compliance landscape has changed unrecognisably in that time.”
 
Regardless of what those in the sector think, these are turbulent times for trusts with regulatory pressure and media hostility mounting; trusts are often ‘misunderstood’ by the man on the street.
 
Paul Beale advised practitioners to set out their roadmap to navigate the next year. “We have to adapt to the new, more transparent world. There will be challenges,” he said.
 
Among those will be the changes to the residency status of non-doms, coming into effect in April 2017, which will impact the way inheritance tax is applied to properties held in an offshore trust or corporate vehicle.
 
Matthew Guthrie, partner at Mourant Ozannes, identified some key challenges for the trust sector but remained confident that they would be overcome. Brexit could not be ignored, he said: “If the City of London becomes a low-tax jurisdiction in its own right this would impact the Channel Islands, however it is unlikely to be politically feasible.”
 
There was also pressure for a public register of beneficial ownership to be created – a move that would render a main selling point of a trust - privacy and security - irrelevant. Nevertheless, Guthrie foresees several positive factors in the islands’ future such as the regulatory burden of Brexit actually driving business to places like Guernsey.
 
“Companies are leaving places like the BVI, where they are bringing up their AML regime, and coming to Guernsey.” He argued that as costs inevitably increase, and even the playing field for IFCs, clients are likely to want to consolidate in one trusted jurisdiction – which plays into the Channel Islands’ hands.