New Regulations to change the UK trust register came into force on 6 October. The Register will now include a much broader range of trusts, including 'bare' trusts (essentially nominee agreements) and this will push a lot of simple arrangements into the registration requirements. There are however a number of helpful exceptions discussed below.
One such welcome exception, is that offshore trusts that form a business relationship with a UK adviser will be exempt provided they have no UK trustees. This is quite rare and is not expected to adversely impact the UK trust industry to the extent originally feared.
There is quite a long lead-in time for new registrations, i.e. until 10 March 2022. Thereafter, much shorter 30-day deadlines apply to both registration and updating the register. Trustees should be alert to this when the time comes.
The key changes and details of new public access arrangements are summarised below.
New trusts in scope
Until now, the UK Trust Register has been limited to trusts that pay UK tax. Subject to certain exceptions, all UK express trusts will now be required to register, even if they have no UK tax liabilities. Non-UK trusts which do not pay UK tax must also register if they:
- acquire an interest in UK land, or
- have at least one UK resident trustee and form a new business relationship with a UK business required to conduct anti-money laundering compliance.
There is an exception for some trusts required to register in another European Economic Area (EEA) state, plus a long list of trusts that are specifically excluded.
These include: legislative trusts (such as intestacy trusts and certain trusts for children arising after death); trusts imposed by Court Order (e.g. on a divorce); trusts holding sums/assets of a registered pension scheme; trusts holding life policies and, for two years after death, the proceeds of life policies; UK charitable trusts; 'pilot' trusts (created before 6 October 2020 and holding £100 or less); trusts effected by Will (for no more than two years after date of death); co-ownership trusts (such as jointly held land, provided the trustees and beneficiaries are the same persons); maintenance funds for historic buildings; disabled beneficiary trusts and several trusts which arise in commercial contexts such as nomineeships for investment management, trusts holding client money etc.
Unfortunately, bare trusts are not excluded. This means bare trusts for minor children and trusts for co-owners of land where title is not held by all of the beneficial owners must register. Furthermore, once an excluded trust becomes taxable, it will then need to register.
This new registration requirement only applies to offshore trusts with at least one UK trustee. Non-UK trusts rarely have UK trustees but if they do, this will only catch new relationships with UK regulated businesses formed on or after 6 October 2020 that are expected to last for at least 12 months or more.
Acquisitions of UK land
All offshore trusts that acquire UK land (where the trustees become the registered owners of a freehold or leasehold interest of more than seven years) will need to register by 10 March 2022, even if there are no UK trustees and no UK tax liabilities. Trustees purchasing land will usually need to pay SDLT and would need to register anyway as taxable trusts. The new rules will catch trusts acquiring land post 5 October 2020 by gift or via an exempt transfer.
However, concessions have been made for this category by limiting the information required and public access to it (discussed below). Acquisitions through an underlying non-UK company will not require the trust to register but from 2021, the holding company will be caught by a new Register of Overseas Entities, which will be publically accessible.
Taxable trusts have more extensive reporting requirements, and trusts currently registered will need to provide further information by March 2022. Reporting for non-taxable trusts is limited to basic details of the beneficial owners including their name and nature and extent of interest or role in the trust. No information about the trust or its assets is required, except for details of "third country entities." This only applies to trusts with more than 50% of the shares or voting rights or which exercise significant influence or control over a non-EEA company. However, there is an exception to reporting third country entity details for non-UK trusts which only need to register if they acquire UK land, provided they have no UK trustees.
The UK trust register is not fully open to public inspection but the new Regulations permit HMRC to give access upon request in two situations, subject to certain safeguards.
Firstly, beneficial ownership information will be made available to a person with a "legitimate interest" because they are investigating and suspect money laundering or terrorist financing, provided disclosure will not prejudice police investigations or criminal proceedings. Secondly, for trusts with a controlling interest in a third country entity (such as an offshore company), other than offshore trusts acquiring UK land with no UK trustees, the beneficial ownership information will be more widely available to anyone who requests to see it, not just those with a legitimate interest.
In either case, HMRC can refuse a request if the beneficial owner is under 18, lacks capacity or there is a risk of kidnapping, blackmail, violence, fraud or harassment. However, Trustees will not be notified of public requests and may be unable to demonstrate cases at risk.
These wider access arrangements do not commence until 10 March 2022 and do not appear to apply to taxable registered trusts. In practice, they should not apply to any offshore trust with no UK trustees either, where information will only be available to HMRC and law enforcement bodies.
Trustees must keep their own records of beneficial owners and supply the details on request to law enforcement authorities, banks and advisers etc. From 10 March 2022 an excerpt from the trust register must also be supplied and businesses will be required to report any discrepancies between this and other information provided, unless legal privilege applies.