Blinded by the light of scrutiny

The UK Chancellor, Rishi Sunak, is coming increasing scrutiny about his use of a 'blind trust' he established last year in the wake of being appointed a Cabinet Minister. But what are blind trusts and why have  they historically been used by politicians?

The nature of a blind trust will depend on the terms of the trust but is often a 'bare trust' in which case an individual transfers their assets into the ownership of independent trustees but they remain absolutely entitled to the trust assets.  

The trustees are typically given the power to buy and sell trust assets as they see fit without informing the beneficial owner, so as much as Mr Sunak would have known what he put into the trust, he may not now know what is in it.  The trust is blind to the extent that only the trustees are shown as the owners of the assets. 

Although the trust may be blind, its tax treatment as a bare trust is anything but, with the requirement of the beneficial owner to declare all income and gains generated by the trust on their annual income tax return and pay tax at their marginal income tax rate.  

Blind trusts are principally used by politicians to avoid conflicts of interest, to reassure the public that political decisions are not being made by politicians for personal financial benefit.  In this instance though, with pressure on public spending mounting, Mr Sunak, as Chancellor of the Exchequer is finding that it is the use of a blind trust itself which is giving rise to a conflict of interest, not his investment interests.