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General Data Protection Regulation (GDPR), is a set of EU rules on data protection and privacy; it is a vital component of EU privacy law and of human rights law.

GDPR addresses the transfer of personal and corporate data outside the EU and EEA areas. The primary goal of GDPR is to enhance an individuals control and rights over their personal data and to simplify the regulatory environment for international business.

This means corporate and trust service providers (which are regulated entities) are required to review all documentation they hold and, if necessary, retain or destroy documents in line with GDPR regulations on the retention of Data.

GDPR encompasses both current clients as well as clients and related corporate entities or trusts which have closed, dissolved or been struck off.

A prospective settlor should seek their own independent tax advice from a tax expert in the jurisdiction they are resident/domiciled, and in the jurisdiction(s) where the assets to be placed into the trust are located. Each settlor's circumstances and requirements will be unique and therefore the advice should be tailored accordingly. It is important that the settlor is completely transparent with their tax adviser so that full and accurate advice can be provided.

  • The tax residence and domicile of the settlor should be ascertained and any tax implications understood.
  • The location of the assets to be placed into the trust should be confirmed. In a globalised world, it is not unusual for a settlor to own assets in multiple jurisdictions which will have their own unique tax regimes.
  • The residence status of the beneficiaries needs to be determined as there may be ongoing tax reporting obligations for both the beneficiaries and the trustees.
  • Consideration should be given to how widely the beneficiaries are described; while at the outset this may not be considered an issue, during the lifetime of the trust this could become a complex issue.

When setting up a trust you must be aware of the increased tax transparency through disclosure regimes such as FATCA (Foreign Account Tax Compliance Act), CRS (Common Reporting Standards) and public registers. It is important to understand your own tax status and responsibilities, and that of the beneficiaries of the trust. Trustees will ask their clients to confirm they have sought independent tax advice before setting up a trust and may also request a copy of such advice before proceeding.

A discretionary trust is the most commonly used form of trust in the Isle of Man.

The discretionary trust deed will typically give the trustees wide discretionary powers to apply the income and capital of the trust assets for the benefit of a class of beneficiaries. This is in contrast to a life interest trust which usually stipulates that named individuals have the right to benefit from certain trust assets or the income generated therefrom.

Each member of the class of beneficiaries in a discretionary trust has an equal hope of benefitting from the trust assets, but no single beneficiary has a vested interest in or entitlement to the trust fund. A discretionary trust is a very flexible arrangement and can be tailored to meet a wide variety of specifications. It can be a particularly useful vehicle for succession planning, where perhaps the settlor wishes to provide equally and fairly for their children and future generations, since the class of beneficiaries can be revised at any time.

A settlor may provide guidance in the form of a letter (or ‘memorandum’) of wishes as to how they would prefer the trustee to exercise its discretion; however, a letter of wishes is only a persuasive document and is not binding. The trustee remains the legal owner of the trust assets and, ultimately, has unfettered control and discretion over the administration of the trust.

Transactions are nearly always fast paced; different teams of advisors running around to avoid delay and trying to keep everyone happy. Each team will have their priorities and unfortunately the paperwork can take the longest. This will result in the inevitable question – can we get the deal done and do the paperwork afterwards?

Sadly the answer is often no. The paperwork, such as government or regulatory filings, finance and security documents, and legal opinions (to name a few), need to be prepared in advance and/or submitted before or at closing. The paperwork has to happen to ensure the transaction is legal and to reduce unforeseen risk to the client. Further, if the transaction is international, parties may be required to have board resolutions and powers of attorney notarised, apostilled and legalised before transaction documents can be signed and submitted.

If certain documents are unable to be completed in advance, the obligation to provide these may become a ‘condition subsequent’. Make sure you know how long you have to complete the paperwork otherwise you may find yourself in default!

Lastly, in our experience, getting the paperwork completed gives peace of mind for the future if a transaction is ever reviewed, audited or questioned.

When buying an asset (a house, a car or an aircraft for example), it is incredibly important to know the history of the asset together with the identity of the seller. In fact, it is important to know who all the parties are in the transaction, especially where money will change hands – it just makes sense to check you are not exchanging money with a criminal!

Today’s regulatory environment means that nearly everyone needs to provide client due diligence (CDD):  the client to the corporate services provider, the tax advisor to the lawyer, the buyer to the seller. Having CDD ready in anticipation of being asked will certainly help speed up any transaction. And its not just for businesses; the UK’s Unexplained Wealth Order is just one example of legislation requiring people to reveal how they have come into possession of money.

What CDD will be required: generally the minimum the client should expect to be asked to provide are certified copies of their passport and utility bill. More documents and information may be required depending on the type of transaction, corporate structure and whether or not any party is regulated (for example, tax advisors and corporate services providers are regulated and therefore the level of CDD they are required to collect is dictated by law.)

Why CDD is required: at a legal and regulatory level, most jurisdictions now require parties to a transaction to establish the legitimacy of funds used to buy expensive assets. The rules generally require the party receiving funds to establish not just where the funds are coming from (the ‘Source of Funds’) but also how the payee came into possession of the funds (the ‘Source of Wealth’). It is important for all parties to comply with international legislation in this area and increasingly proof of any payments made need to be provided.

To summarise, compliance with CDD rules is mandatory for nearly all transactions: so don’t be offended, do be prepared, and save time by having your documentation ready.

A Chartered Tax Advisor is someone who is a trained and experienced member of a professional body who adheres to a code of conduct and ethics set out by the relevant institute. Advice from a Chartered Tax Advisor should be professional, impartial and is required to consider the needs of the client as first priority. The tax team at Martyn Fiddler Aviation is comprised of advisors with over 70 years of combined experience and who are all Chartered Tax Advisors – either qualified in the United Kingdom or Rep of Ireland.

If you think you would benefit from the advice of our tax team please get in touch with either Adrian, Alena or Greta.

Most definitely fiction! The Isle of Man is a self-governing jurisdiction that is part of the British Crown that enjoys separate autonomy and is known for its well-established finance and offshore sector. The Island is home to 86,000 residents and boasts the oldest continuous parliament in the world that has no debt to service. The Manx parliament is only allowed to pass fully funded budgets from taxation and its own reserves. The Government in turn provides a fully funded European style health care system, an excellent education system, a welfare system to support those that can't support themselves and provides all of the other functions that are expected from highly regulated international jurisdictions'. It pays the UK Government to provide defence (which it does well) and foreign affairs. To deliver all of these functions the Government clearly has to raise taxes to fund the provision of these services and so it has a very simple and transparent tax regime; residents pay income tax at 10-20%, it charges VAT on the goods and services, it charges Corporation Tax on some, but not all, commercial undertakings (specifically banking, large retailers and property development are taxed other commercial undertakings enjoy a rate of 0%), it charges duty on the usual range of goods like petroleum and alcohol. The Island does not impose capital gains tax, wealth tax, stamp duty or inheritance tax.

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