The UK’s Trust Register legislation (“the AML Regulations“) came into force on 26 June 2017 and established a central UK Trust Register, maintained by HM Revenue & Customs (“HMRC“).
The Trust Register is not publicly searchable but it is available to:
- HMRC, law enforcement and other competent authorities;
- those entering into a business relationship with a trust (such as a bank); and
- those that can demonstrate a legitimate interest in a trust’s beneficial ownership information.
This article discusses the Trust Register rules, how they have been widened recently, and a common example of the application of the Trust Register rules in an offshore context.
Trust Register rules
The AML Regulations originally only required certain trusts that incurred liability to UK tax to file beneficial ownership information for the Trust Register. Taxable non-UK trusts were included within these original requirements if they received taxable UK-source income or held taxable UK assets.
On 6 October 2020, the legislation was widened to include a broader category of trusts, including non-taxable trusts. The amendments brought into scope non-UK trusts:
- with at least one UK resident trustee, where the trustees either enter into a new business relationship with a UK service provider (such as a lawyer, accountant or investment manager) or acquire an interest in UK land, in each case after 6 October 2020. This is whether or not the trust has generated any UK tax, unless the trust is registered elsewhere in the EEA; and
- with no UK resident trustees, where the trustees acquire an interest in UK land after 6 October 2020, again whether or not the trust has generated a UK tax charge; however, this time, registration elsewhere in the EEA does not prevent the trust from needing to be registered in the UK.
The date for registration of trusts within scope under the widened rules is generally 1 September 2022 but could be earlier for taxable trusts. Applicable trusts set up after 4 June 2022 (or which first become registrable after that date) will need to be registered within 90 days.
Non-UK trusts holding UK property
A registration scenario with which we often deal relates to non-UK dry trusts (set up before 6 October 2020) and holding UK property directly, as the only settled asset. Unless or until such a trust triggers a UK tax charge, typically on disposal of the property, it would not be registrable as a taxable trust. Provided the trust does not have a UK trustee or, if it has one, the trustees do not enter into a new business relationship with a UK service provider after 6 October 2020, it would also not be registrable under the widened rules for non-taxable trusts. However, suppose the trustees want to sell the UK property and wind up the trust?
In this situation, the trust would potentially become registrable even if the trustees immediately distribute the sale proceeds to the beneficiaries and close the trust.
This is because if the trustees trigger a gain, they would be liable to pay non-resident capital gains tax (“NRCGT“) on the disposal. The trust would become a “taxable relevant trust” and thus be registrable under the AML Regulations. The fact that it is being immediately wound up does not affect the registration obligation, which has been a consistent HMRC policy from the outset.
The requirement to file an NRCGT return is in point even where the disposal is at a loss. The same applies in relation to the registration obligation imposed on taxable non-UK trusts. This is because the trustees would be “liable to tax”, even if not actually “subject to tax”. Draft HMRC guidance issued in November 2017 in the form of Frequently Asked Questions muddied the water somewhat when it stated that no requirement to register arose where trustees claimed a tax relief, with the effect that there was no liability to pay any of the relevant UK taxes. However, the same guidance also states that trustees are relieved from the reporting obligation if they do not need to file a tax return (which they do for loss-making transactions under the NRCGT regime) and have not incurred a liability to pay any of the relevant UK taxes.
Use of nominees
Would the situation be different if the non-UK trustees held the UK property via a non-UK based nominee?
The same trigger for registration (i.e. the trustees owning an asset in the UK on which they are liable to pay UK tax) would not exist as the nominees would be the registered owner of that asset, not the trustees. However, whilst this means that there is no requirement for the trustees to register, the nominees would need to do so. There are specific exemptions for nominee arrangements in the context of commercial activities, the pending registration of legal title or the professional custody of portfolio investments, but none of these would apply on the scenario we are concerned with. The nominee would trigger the registration requirement on a disposal of the property and would thus need to report the beneficial owners under the nominee arrangement (i.e. the trustees and beneficiaries of the offshore trust). The use of nominees would not result in HMRC receiving any less information on the trust than it would do without the arrangement.
We have been advising on and registering trusts (UK and non-UK) since the Trust Register came into existence and would be pleased to assist with any registration enquiries you may have. HMRC can charge financial penalties for non-compliance.
 The Money Laundering, Terrorist Financing and Transfer of Fund (Information on the Payer) Regulations 2017
 Under new regulations to come into effect on 9 March 2022