Are Trusts in Your UK Ownership Structure? Don’t forget to register with the UK Trust Registration Service

We Previously reported on the introduction of the trust registration service in 2017 and, in particular, on its likely impact on the commercial real estate industry. The Fifth Directive on Money Laundering (MLD5), which entered into force on October 6, 2020, considerably broadened the scope of registration obligations. In this article we have detailed the changes that have been made and the practical implications for UK owner structures.

Background

As previously reported in our HSF Bulletin, the Trust Registration Service was opened in 2017 and has imposed various registration and reporting requirements on trusts subject to UK tax. HMRC issued time limits in this regard and penalties for non-compliance were to follow.

When it comes to the real estate world, we have noted that registration requirements can primarily impact trustees of mutual funds (such as Jersey or Guernsey real estate trusts) who engage the SDLT on property acquisitions or nominated trustees / bare trustees who engage the SDLT on granting new leases. Offshore trusts that are subject to non-resident CGT on assignments may also be required to register.

Which is new?

The HMRC has expanded the scope of trusts that must register with the TRS, so that all express trusts (with some limited exceptions) must register whether or not they are subject to tax. British.

Which trusts must register?

The new regulations will affect, subject to limited exclusions:

  • all UK resident express trusts and UK resident trusts incurring UK taxes on trust income or assets directly held by the trust;
  • non-UK trusts, where a UK tax liability is triggered in respect of UK source income or UK assets held directly by the trust; Where
  • non-UK express trusts;
    • who acquire an interest in British lands; Where
    • with at least one UK resident trustee who does business with certain categories of companies (including financial institutions, accountants, lawyers, company or company service providers and estate agents, among others)
    • The non-UK express trusts referred to in the third point are subject to a number of exclusions which may be relevant in the real estate context, in particular as regards pension funds, condominium structures, temporary trusts pending legal transfer title, among others.

What does this mean in concrete terms for real estate structures?

The requirement to register with the UK Trust Registration Service is likely to affect common property holding structures, especially Jersey or Guernsey real estate trusts or nominee / bare trustees who directly hold property in the UK. United. Where a trust exists in a UK property holding structure, we would expect advice to be sought as to whether the trust is required (if not already) to register with the UK Trust Registration Service.

While the legislation provides that affected trusts must register by March 10, 2022, HMRC announced that due to required technical upgrades, this deadline has been extended to September 1, 2022 (for existing trusts from October 6, 2020).

What are the implications in the event of non-compliance?

Details of the sanctions regime have not yet been released. During the consultation, HMRC suggested that it does not expect to immediately increase fines for non-compliance and that registration failures are likely to result in sending first. notification to the trustee. Any other failure to register thereafter may result in fines.

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