Background to the TRS
The UK Trust Register was introduced as part of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLR 2017“). Up until then, there was no central register of trusts in the UK. When it was first introduced, MLR 2017 applied to “express trusts” (broadly, deliberately created trusts) that generated UK tax. In 2020, the legislation was expanded to include non-taxable trusts. However, there are exclusions that may be relevant in a commercial property context.
The register itself is an online database (“the Trust Registration Service” or “TRS“) maintained by HM Revenue & Customs (“HMRC“). The register is accessible to law enforcement agencies and not freely accessible to the public; however, it can be accessed by the public if the applicant can show a “legitimate interest” (for example, in connection with money laundering investigations) or makes a “third country entity request” (for information about controlling interests in a non-UK company or other legal entity).
The starting point with UK trusts is to assume that the trust may need to be registered provided it is an express trust and does not fall within one of the exclusions in Schedule 3A of the MLR 2017.
For non-UK trusts, registration may be required if the trust is an express trust and:
- the trustees receive income from a UK source or have UK assets on which UK tax is due (regardless of whether any exclusion applies);
- the trust does not meet one of the exclusions and the trustees acquire an interest in UK land (however, in the case of a non-taxable trust, only where that acquisition takes place after 6 October 2020); or
- the trust does not meet one of the exclusions and the trustees enter into a business relationship with a UK service provider (such as a lawyer, accountant or investment manager) but only if the trust has at least one UK trustee and is not registered elsewhere in the EEA.
How the TRS applies to authorised unit trusts
There is a specific “professional services” exclusion for trustees of authorised unit trusts (“AUTs“). This is available to those acting by way of business as the trustee of an authorised unit trust scheme (where “trustee” and “authorised unit trust scheme” have the meanings given in s.237 of the Financial Services and Markets Act 2000). This means that AUTs do not need to register on the TRS by default; however:
- this exclusion only endures for so long as the AUT does not incur “UK tax“; and
- the TRS record-keeping requirements may still apply.
“UK tax” means the main personal taxes, stamp duty land tax (“SDLT“) (and its devolved equivalents) and stamp duty reserve tax. It does not include corporation tax. It will be SDLT that is most likely to be relevant in triggering TRS requirements in a commercial property context.
How the TRS applies to unauthorised unit trusts
Up until 31 January 2023 HMRC’s position for unauthorised unit trusts (“UUTs“) was that they did not need to register. However HMRC’s view is now that UUTs need to register if they meet the general registration requirements for express trusts. For onshore UUTs, this means they will need to register by default. For offshore UUTs, like Jersey property unit trusts (“JPUTs“), such trusts will need to register if:
- the trustees acquire UK property after 6 October 2020; or
- have UK income or assets on which they are liable to pay UK tax since the MLR 2017 was first introduced in 2017.
How TRS applies to nominee companies
Nominee companies that directly hold commercial property are registrable (unless one of the exclusions applies) whether the nominee has incurred UK tax or not, as the arrangement will generally be an express “bare trust“.
A potentially relevant exclusion is for “commercial transactions“. This is available for trusts that are created for the purpose of facilitating a transaction effected for genuine commercial reasons, provided the use of the trust is incidental to the principal purpose of the transaction. There is little detailed HMRC guidance on the application of this exclusion, so this would need to be analysed on a case-by-case basis.
There are three additional obligations that may apply to trustees holding commercial property. These are to:
- maintain accurate written internal beneficial ownership records;
- provide the above information to “relevant persons” (such as banks) on request; and
- provide the above information to law enforcement agencies on request.
These three obligations apply to all UK express trusts (such as onshore AUTs, UUTs and nominee companies) regardless of whether they need to register on the TRS and whether an exclusion applies. The obligations also apply to non-UK trusts in the majority of circumstances outlined under the “Registration criteria” heading above.
Since 4 June 2022, the registration window has been 90 days starting from the date the trust became registrable. The deadlines prior to 4 June 2022 varied depending on whether the trust was taxable or non-taxable, when it was set up, and when any tax liability occurred; but in all cases, those deadlines have now passed. If a trust became registerable before 4 June 2022, it should register as soon as possible.
Information to be disclosed on the register
Trustees must disclose basic information about the trust including the date it was set up, details of the assets under management, and information on the trustees. They must also disclose information on the “beneficial owners” of the trust, whether these be individuals or entities. More information is required of taxable trusts, than is required on non-taxable trusts.
There are penalties for non-compliance with the TRS rules. HMRC’s current guidance is that will be no penalty for a first offence unless there is evidence that the failure is due to deliberate behaviour or the offence was not corrected within the time limit set by HMRC. Otherwise, a £5,000 penalty may be charged for each offence. There is a separate penalty regime for trustees found to be involved in money laundering or terrorist financing.