Bare or possession trust registration vs. nominee shareholder: when you'e looking at limited company structures, you might come across the choice between a bare trust and opting for a nominee shareholder. If you wish to discuss the options, Coddan Formations Agency can help.
A nominee shareholder holds stock in a basic custodial arrangement and has been, to this point, a hugely popular approach as it allows a certain level of anonymity. The government is determined to introduce legislation at some point, however, that demands total transparency and the full disclosure of details.
This includes the name and service address of anyone that owns or controls more than 25% of a private company. This will certainly have an effect on those that do business through a nominee shareholder, if they are operating this way purely for the purpose of anonymity.
As one door closes, though, another opens. Many that worked under the relative safety of a nominee may now turn to the likes of a bare trust. This simple trust holds shares in the name of a beneficiary, who then becomes liable for the tax.
Bare trusts have traditionally been used to place shares and assets in trust for a minor and achieved popularity as a means of minimising inheritance tax. Now that the government wants to create a register of UK companies' ownership details, though, the bare trust has the potential to be used in other ways.
A bare trust lies somewhere between an actual trust and ownership. It passively holds assets or shares under the control of trustees, with a named beneficiary being responsible for the income and capital gains tax liabilities.
If this named beneficiary is in a more beneficial EU member state, or is a minor, then the tax liabilities can be significantly reduced legally, without being dragged in to the government's quest for full transparency.
Nominee shareholders still have a place and can be a perfectly valid way to structure a company, avoid the full glare of the legislation and run your business as you see fit. At the moment, it is still a solid way to structure a company and one we set up every day at Coddan Formations Agency. In the future, though, the bare trust may be a more popular, convenient and tax-efficient way to structure your business.
If you're considering either option, get in touch with Coddan today for a consultation.