Mandatory to register non-taxable trusts with HMRC’s Trust Registration Service?

Mandatory to register non-taxable trusts with HMRC’s Trust Registration Service?

16:21 PM, 10th March 2022, About 3 months ago 5

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If you hold a property as a nominee on behalf of another person or company, it may be mandatory to register this trust with HMRC’s Trust Registration Service (TRS) by 1 Sept 2022. Previously, non-taxable ‘bare trusts’ did not need to be registered.

In general, if a bare trust is an express trust, it should register on the TRS, unless it falls within the definition of excluded trusts. Presumably, this requirement will apply to the Beneficial Interest Company Trusts that Property118 and Cotswold barristers have written about on this website.

Has anyone registered a bare trust using HMRC Online Services and can they talk me through the process?

For example, I am unsure whether to create a new Government ID specifically for the trust or use my existing one.

Many thanks

Kneidel



Comments

by Mark Smith (Barrister-At-Law)

16:31 PM, 10th March 2022, About 3 months ago

These requirements arise from the Government’s efforts to combat money laundering by requiring transparency in a number of hitherto private transactions, including trusts. Several of our services include the creation of a trust and we have advised on these requirements to all past and present clients who are caught by them.

a) LLP.
In an LLP the members hold the partnership properties on trust for the LLP. Our view is that this type of trust is not caught by the requirement. Certain trusts created in the context of commercial transactions are excluded from registration by Sch3A (14) of the Regulations 2017 when they meet the following requirements.

The trust must be created for the purpose of:
• Enabling or facilitating a transaction effected for genuine commercial reasons, or
• Protecting or enforcing rights relating to such a transaction. The trust must also be incidental to the principal purpose of the transaction.

b) Substantial Incorporation Strategy or SIS (formerly Beneficial Interest Company Transfer or BICT).
In each of these transactions, unless all of the legal titles have been transferred to the company at the Land Registry, the legal owners hold the properties on trust for the company. Our view is the trusts created in these transactions are not caught by the requirement.

Certain transactions (including sale of land) require specific formalities to be carried out in order to transfer legal title. Where beneficial title passes on completion, but legal title does not pass until those formalities are carried out, the legal title may be held on trust for the relevant party to protect their interests, pending completion of those formalities.

Trusts created in that context are excluded from registration by Sch3A (15) of the Regulations 2017 if they meet the requirements below.

This exclusion applies to a trust created on the transfer or disposal of an asset, where the purpose of the trust is to hold the legal title to the asset on trust for the person to whom the transfer or disposal is being made until the time when the procedure required by law to effect the transfer or disposal of legal title is completed.

c) Discretionary Trusts in Smart Companies or with Freezer/Growth share structures.

These trusts will need to be registered. The first deadline is 1st September 2022 at present, so there is no particular pressure of time.

There are two separate registration requirements.

The first arises from the trust being an express trust, and the second additional requirement arises when the trust becomes liable to any form of tax. It is highly unlikely that this will arise before the 10-year anniversary charge to IHT, and even then is unlikely to arise given the value of the assets that would be held in the trust at that juncture. Nevertheless, you should take professional advice from your accountant.

The first deadline arises on 1st September 2022. The lead trustee (nominated by the trustees to file the registration) or your appointed agent will need to obtain a Government Gateway Code HERE

Lead trustees
All trustees are equally legally responsible for the trust, but you must nominate one ‘lead’ trustee to be the main point of contact for HMRC. The lead trustee will receive the trust’s UTR if registering a taxable trust and a URN if registering a non-taxable trust. You will need to keep their contact information up to date.

Beneficiaries
You should give the details of all known beneficiaries who can benefit from the trust. If you have more than 25 beneficiaries in any one beneficiary type, keep a note of additional beneficiaries for your own records.

Named beneficiaries
You must give details of all individuals, trusts, charities and organisations named as beneficiaries in the deed. Some named beneficiaries will only benefit when a certain event happens, such as when another beneficiary dies. You can include these in a class of beneficiaries until the event occurs. At that point, provide their details on the register as a named beneficiary.

Classes of beneficiaries
You can use a ‘class’ of beneficiaries to describe a group of individuals who are not yet known or named individually in the trust deed, for example, future grandchildren. This can also include named potential beneficiaries. When a member of a class of beneficiaries benefits from the trust, and so becomes known, you must give their details. You will be asked to give a description of each class.

by Mark Alexander

17:24 PM, 10th March 2022, About 3 months ago

Reply to the comment left by Mark Smith (Barrister-At-Law) at 10/03/2022 - 16:31
Thank you for this clarification Mark Smith.

I know you wore to all existing clients on this matter a few months ago and the companies we outsource Discretionary Trust work to are also in the process of writing to all of their Clients now.

We advocate “Integrity in Business” and the fact this has all been done well ahead of schedule and at no cost to Clients we have referred to Cotswold Barristers is clear evidence of this business philosophy we share.

by Rumble

10:04 AM, 11th March 2022, About 3 months ago

@Mark Smith (Barrister-At-Law)

Thank you for that detailed response.

My situation that the the legal owner has held the property on trust for the company since time of purchase from a third party. i.e SIS/BICT

If I understand correctly, you state that your view is that the registration requirements do not apply to this arrangement because of the exemption of:

"the purpose of the trust is to hold the legal title to the asset on trust for the person to whom the transfer or disposal is being made until the time when the procedure required by law to effect the transfer or disposal of legal title is completed."

However, this exemption would seem to apply to a transaction that is underway but not yet completed as it states "is being made" in the present tense; not "has been made", and "until ... the procedure ... is completed", suggesting the transfer process is underway.

Would it apply to a situation like mine where the transfer procedure for the legal ownership has long completed but the legal and beneficial ownership remain separate and there is no ongoing transfer process to change that?

by P118a

10:05 AM, 11th March 2022, About 3 months ago

Not sure I agree with Mark Smith about the SIS (b) above. The quoted exemption from registration does not quite appear to fit the bill.

Surely there is no risk or issue with registering the SIS arrangements anyway to avoid any possible problem, especially as this does not give rise to any tax consequences.

by Rumble

10:15 AM, 11th March 2022, About 3 months ago

Reply to the comment left by at 11/03/2022 - 10:05
My concern about registering is:
a) The property is mortgaged in the legal owner's name so I don't want to upset the applecart by registering the beneficial interest in a company's name.
b) The legal owner is planning to move abroad and I don't quite understand the impact of this for registered trusts. Therefore, I'd rather avoid registration if not required.


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