For an underlying company, ABC Ltd, of a non-UK trust, the ABC Trust, purchasing commercial property, we must consider two scenarios:
- Acquisition by the trustees of UK commercial property; and
- Acquisition of UK commercial property through the underlying company, ABC Limited.
So, who does the Trust Registration Service (TRS) apply to?
- All UK resident express trusts; and
- Non-UK resident express trusts with a liability to certain taxes, namely ICT, CGT, IHT, Stamp Duty.
Let’s take a look at our ABC Trust
As a non-UK trust, the trust has no UK tax liability, it has no obligation to register the relevant information with HMRC. BUT one of the relevant taxes is SDLT: if therefore the trust itself buys UK property, it will have an SDLT liability and must therefore register with HMRC under the TRS requirements.
What information must you report?
Name, date of creation, country of tax residency, a statement describing the trust property and the values of the different asset classes, AND the "beneficial owners" of the trust. Importantly, the BOs include:
- Named beneficiaries;
- Any person with power to add/remove beneficiaries or trustees, or to veto distributions – such as a protector therefore; and
- 'Potential beneficiaries' – ie those referred to as potential beneficiaries in a document like a letter of wishes.
Now, consider instead that the commercial property is not purchased by the ABC Trust directly, but through its underlying company ABC Limited. What effect would this have?
Under the TRS, if UK tax is incurred only at the level of an underlying company, that is not a direct tax on the trust itself and as a result the trust will NOT have to register with HMRC. So although the directors of ABC Limited will have a tax charge, the trust itself will not be subject to any reporting obligations.