Which trusts will be caught?
The regime applies to all UK express trusts and to non-UK express trusts where the trustees acquire UK property directly, in each case, unless they are specifically excluded. An express trust is one which is intentionally created rather than one which results by operation of law or arises unintentionally. A trust is a UK trust if all of its trustees are UK resident. If there is a mixture of UK resident and non-resident trustees acting at the same time the trust will be a UK trust if the settlor was UK resident and domiciled when the trust was set up or when they added funds to the trust. Otherwise the trust is a non-UK trust.
The regime also applies to non-UK express trusts which:
- receive income from a source in the UK or have assets in the UK on which the trustees are liable to pay one or more of a prescribed list of taxes. This list covers income tax, CGT, IHT, SDLT and its devolved equivalents in Scotland and Wales and stamp duty reserve tax, but not VAT, or
- have at least one trustee resident in the UK and enter into a "business relationship" with a relevant person within the UK. It is rare that trusts will have a mixture of UK and non-UK resident trustees in this way. If the trust is wholly offshore with non-UK resident trustees then the trust is not caught by this limb.
Some of the key exclusions from registration in the context of real estate are:
- Registered pension schemes. The application of the TRS to pension schemes is discussed further in Anti-money laundering and pension trustees: which trust must register with HMRC by 1 September 2022?
- Charitable trusts
- Co-ownership trusts set up to hold property where the property is held as tenants in common provided the trustees and the beneficiaries are the same persons
- Trusts holding tenants' contributions for the purposes of section 42 of the Landlord and Tenant Act 1987
- Certain 'financial' or 'commercial' trusts created in the course of professional services or business transactions for holding client money or other assets.
Importantly, however, these can only apply so long as the trust is not taxable. Even where an exemption from registration applies, the trustee will generally still be required to keep certain records, so the rules will still need to be considered.
Other less common types of express trusts which are set up for particular purposes are also excluded unless they have to be registered because they are liable to pay tax. Note that home ownership where the property is held by co-owners but for themselves as joint tenants (without a separate declaration of trust) falls outside of the rules.
Arrangements which involve purely contractual obligations do not give rise to an express trust so fall outside of the scope of the TRS. These include: a comingling rent deposit where, after the deposit is paid, the landlord owes the tenant a debt equivalent to the deposit less any deductions for non-performance by the tenant; rent deposits paid to landlords as security for the performance of the tenant's lease covenants and the money belongs to the tenant but is charged to the landlord; and on account service charge amounts paid by the tenant to the landlord in advance each year to cover the running of the common parts of a building or estate.
Timing
Registrable taxable trusts set up before 6 April 2021 already have to register with the TRS by 31 January following the end of the tax year in which a tax liability arose. The deadline is 1 September 2022 for trusts set up on or after 6 April 2021 where the trustees become liable to pay a relevant tax before 4 June 2022 and within 90 days of the trustees becoming liable to pay a relevant tax in any other case.
As noted, above, the service has now been extended to non-taxable express trusts. Although the deadline for registration for these was originally 10 March 2022, for non-taxable express trusts created before 6 October 2020, this has now been extended to 1 September 2022 (and for non-taxable express trusts created on or after 6 October 2020, 1 September 2022 or 90 days after the trust is set up or comes within the rules, if later). This means that new trusts created from 4 June 2022 that are within the scope the TRS must register within 90 days of creation.
What are the main triggers for registration?
In broad terms, there are three main triggers:
- A UK resident trust;
- The trustee itself is subject to a UK tax liability of the type listed above (if the beneficiary or an underlying company is subject to a tax charge then this does not trigger a TRS registration requirement); or
- The trustee acquires a registerable interest in UK land directly on or after 6 October 2020.
Is the register public?
Unlike the Land Registry and elements of the Companies House database, the trust register is not public.
Law enforcement agencies can obtain the information on the register about a trust and its beneficial owners. There are two circumstances in which others can request information from the register. These are: legitimate interest requests in order to facilitate money laundering investigations; and third country entity requests where information is sought about who holds a controlling interest in a non-UK company or other legal entity.
Will nominee companies owning UK land be caught?
Yes, nominees will be caught where they own UK property directly under an express trust.
What about Jersey unit trusts holding UK property (JPUTs)?
HMRC’s published guidance confirms that a UK unauthorised (or authorised) unit trust scheme is not required to register under the TRS. It is not clear whether this extends to a non-UK unit trust scheme which holds UK land, such as a JPUT.
What are the penalties for non-registration?
There are penalties for failing to comply including fines for late filing and there can be criminal sanctions in some cases. It is believed that HMRC will be lenient on penalties initially but this should not be relied on.
What information has to be registered?
The trustees will have to give basic information about the trust including details regarding its beneficial owners. Where the trustee (or any other person having control over the trust) or the beneficiaries are legal entities, this may require the beneficial owners of those entities to be identified. More information is required for taxable trusts than for non-taxable ones.
Practical implications/how to register
Professional trustees will already be fully cognisant of the TRS. However, the rules also apply to other persons who act as trustee of an express trust, even where this is not their day-to-day business.
Registration is through the Government Gateway portal and is relatively straightforward once the necessary information has been gathered.
Next steps
Having pushed the date back to September 2022 for completing registration for many trusts, this date looks unlikely to change again so trustees and their advisers need to move now and not be caught out.
Authored by Jane Dockeray, Ingrid Stables, and Adam Parry.
