Recent legislation and updated HMRC guidance have expanded the scope of trusts that have to register with HMRC’s Trust Registration Service (“TRS“). Given that trust structures are common features in UK real estate ownership, care should be taken to register any relevant trusts before the applicable deadline.
This briefing provides a guide to those involved in UK real estate as to whether you need to register and how to do this. If you require further advice, please contact HSF.
Introduction to The Trust Registration Service
What is the Trust Registration Service?
The TRS is an online system by which trustees are to register the beneficial ownership of certain trusts with HMRC.
It was introduced in 2017 to satisfy the requirements of the EU Fourth and Fifth Money Laundering Directives (4MLD and 5MLD). The initial regulations were then bolstered by the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 (SI 2020/991), which came into effect on 6 October 2020 and expanded the scope of trusts which need to register. This has been accompanied by HMRC guidance note TRSM10000, which has recently been updated to expand the scope further to entities such as JPUTs/GPUTs.
Trusts requiring registration
Which trusts are caught by the registration obligations?
The registration obligation applies to:
An express trust is one deliberately created, as opposed to created by operation of law or implied or constructive trusts.
Guernsey Property Unit Trust (“GPUT”) or Jersey Property Unit Trust (“JPUT”)
A specific type of Guernsey or Jersey trust commonly used to hold UK real estate.
Capital Gains Tax, Income Tax, Inheritance Tax, Stamp Duty Land Tax, Stamp Duty Reserve Tax, Land and Buildings Transaction Tax (in Scotland) and Land Transaction Tax (in Wales)
Taxable Relevant Trust (“TRT”)
A trust which is registrable and also liable to pay one of the Relevant Taxes.
Trust Registration Service (“TRS”)
An online system hosted by HMRC for the registration of details in relation to certain trusts.
Please note that the registration obligation in (b) and (c)(i) relate to UK land interests held directly by a trust. If there is an intervening entity or set of entities between the trust and the property then registration may not be required (unless the property-owning entity is holding the land on trust/as nominee, in which case this arrangement may be registrable).
Are there exemptions?
Certain trusts are excluded (statutory trusts, charitable trusts, co-ownership trusts, pension schemes for example – the full list is available at GOV.uk). The most relevant exemptions in the context of commercial real estate would be:
- trusts created on the transfer / disposal of an asset, where its purpose is hold the legal title until the procedure required to effect the transfer / disposal of legal title is completed (eg legal title being held on trust pending Land Registry effecting the transfer);
- tenants’ service charge contributions being held on trust for the purposes of section 42 of the Landlord and Tenant Act 1987;
- co-ownership of property where the trustees and beneficiaries are the same persons;
- UK registered pension scheme trusts; and
- certain trusts which are incidental or ancillary to the principal purpose of a transaction (eg a wrong pockets clause or funds held in escrow as part of a wider transaction).
What structures in UK real estate is this likely to affect?
Subject to a trust satisfying one of the triggers outlined above, the following structures common in UK real estate are likely to be within scope of the registration requirement on TRS:
- JPUTs/GPUTs – whilst JPUTs/GPUTs were previously thought to be excluded as unit schemes, HMRC have updated their guidance as of January 2023 to clarify that unauthorised unit schemes (which JPUTs and GPUTs are likely to be) are within scope if they meet one of the requirements.
- Property held on bare trust – an entity or person holding a property on bare trust (by way of a declaration of trust, nominee arrangement or otherwise) for another would fall within the ambit of the TRS if it satisfies one of the limbs above.
- General Partner holding property on trust for a Limited Partnership – where a limited partnership agreement states that a general partner holds property on trust for a limited partnership then this would create a trust that may require registration. In contrast, if the limited partnership agreement is silent on this matter, then the general partner is likely to hold property on behalf of the limited partnership by virtue of statute and this would not be deemed a registrable trust.
The Register and the Registration process
How do I register a trust with the TRS?
You can register the trust at GOV.uk. A certificate of registration will be provided.
Before you can register the trust, you will need to have an Organisation Government Gateway user ID and password. If you do not have one for the trust, you can create one when you register using your name and email address.
What details need to be registered with the TRS?
All registerable trusts must provide:
- information about the trust, including its name, date of creation, whether it is an express trust or not, details about any land or property the trust has acquired since 6 October 2020 and whether it has a business relationship in the UK;
- information about the trustees (or the lead trustee), settlors and beneficiaries; and
- information about all individuals or companies that have control over the trust.
If the trust is a Taxable Relevant Trust, you must also provide:
- further details about the trust (country of administration of the trust, how it was set up, any Unique Taxpayer Reference etc.)
- details of liability to income tax / CGT;
- information on the trust’s assets, including market value at the time of registration; and
- additional information on each beneficiary, including NI number or URT (as applicable).
Who can view the TRS register?
TRS filed information is not generally accessible by the public. It is accessible by HMRC, certain law enforcement bodies (including, the FCA, SFO and NCA) and can be accessed by third parties with a legitimate interest in limited circumstances.
What are the deadlines for registration?
The deadlines are detailed depending on when the trust was created and further advice on this can be provided if required. In general, the deadline going forward is for registration within 90 days of the trust becoming registrable (e.g acquiring the UK property or becoming liable for the Relevant Tax).
Does the register need to be updated?
Yes. Once a trust is registered, trustees must update the register using the online service within 90 days of becoming aware of any change to the information provided (including any change to a beneficial owner).
What are the consequences of failing to register / update the TRS?
There are penalties and possible criminal sanctions in respect of a failure to register / update. HMRC’s guidance to date has been that it will not impose penalties unless the failure to register or update is shown to be deliberate.
Lenders / Buyers
Lenders into UK real estate and buyers of UK corporate real estate holding structures are likely to consider the registration / updating status as part of due diligence. Compliance (as with other HMRC and legal obligations) is therefore important to avoid any issues being identified as part of such transactions.