The Trust Registration Service – how it may affect owners of real estate

As trusts are generally seen as an inheritance tax or estate planning tool, it may come as a surprise that one of the most common types of trust in the UK is trusts of jointly held property, also known as co-ownership trusts.  As there are penalties for non-registration, it is important to check whether the way you are holding land will mean that you must register.

HMRC guidance for TRS states that if the legal and beneficial owners of a property are the same people, there is no requirement to register. This exclusion will eliminate most jointly held properties from being required to register. However, when the property is being held as tenants in common and the legal and beneficial owners are not the same people, the trust of land must be registered.

When must a trust be registered?

The trust must be registered if the legal owners of the property are not identical to the beneficiaries.  This could be evidenced by a declaration of trust, or the property may be an asset of a wider trust, evidenced by trust deed or will.

If you run a business as a partnership, you must consider whether the business’s property is held in such a way that registration is necessary. Whilst the presumption is that a property held in one partner’s name and purchased using partnership money belongs to the partnership as a whole, there may be wording in the partnership agreement that creates an express trust that must be registered.

Exclusions from registration

A maximum of four people can be named as the legal owners of property with the Land Registry.  The trust is excluded from registration if there are more than four beneficial owners and the only reason the legal owners and beneficial owners are not the same is due to the restriction on named owners.

Similarly, a minor cannot hold the legal title to property.  If the only reason that the legal ownership and beneficial ownership differ is that there are minor children as beneficiaries, the trust is not required to register.

What are my responsibilities?

This will depend on whether you are reading this as a property owner or beneficiary, or perhaps someone who offers property services to clients.

The trustees are responsible for registration and HMRC has recently released guidance that conscious failure to register, or deliberate non-compliance, can result in a fine of up to £5,000.00.  If the only asset of the trust is the property, this fine is chargeable and potentially payable by the trustees themselves if they are unable to reclaim the funds from the beneficial owners. Any trustee that is unsure of their requirements to register should take advice at the earliest opportunity.

Any ‘relevant persons’ or ‘obliged entities’ taking on a new matter/client that involves a registerable trust are required to request evidence of the registration before beginning any work, as part of their anti-money laundering due diligence checks. There is also a duty to inform the client/trustees of their responsibilities and, in some rare cases, to report any discrepancies to HMRC. This is a newly introduced responsibility that affects professionals such as lawyers, auditors and financial institutions.

We have the expertise and knowledge to provide clear and concise advice in relation to The TRS. If you have any queries or concerns regarding a property transaction or trust that you are planning or involved with, please get in touch with our Wealth Preservation team.