10 May 2023
The continuing march towards transparency – 3 of 4 Insights
The settlor and the beneficiaries of trusts acquiring UK land will almost certainly have to have their details included on one of the UK's registers of beneficial ownership. Which register of beneficial ownership - which crucially determines whether the information is publicly accessible or not - and when the obligation to register arises, will depend on how the interest in UK land is acquired. Individuals who are considered to have control over a trust – which could include a protector, or an enforcer of a purpose trust where a private trust company is involved – could also find their details being included on a register of beneficial ownership.
Many historic trust structures holding UK land will also need to register, depending on when the land was acquired, how and in which part of the UK.
Trust acquiring UK land directly
Where UK land is acquired directly by the trustees of a trust, whether a UK trust or non-UK trust, (including a bare trust or nominee arrangement) the trustees will have to register the trust with HMRC on the UK trust registration service (TRS). Details of the settlor, the beneficiaries and any person who has control over the trust will have to be provided to HMRC. The information on the TRS is in most cases not freely accessible by the public; to access it someone must be able to show that they have a 'legitimate interest' in accessing the information to further work to counter money laundering or terrorist financing activity.
Most trusts which acquired land directly after 5 April 2016 will also need to have registered on the TRS, whether or not UK trusts.
Trust acquiring UK land through a non-UK company
The non-UK company will have to register on the register of overseas entities (ROE) and provide information on its beneficial owners to Companies House. Where the non-UK company is wholly owned by the trustees of a trust any person who has significant influence or control over the trust will be treated as a beneficial owner of the overseas entity. Details of the beneficial owners of the overseas entity will be accessible to the public through Companies House. Information on the trust, the settlor and beneficiaries of the trust and certain other persons who have powers over the trust must also be provided to Companies House; this trust information is not, however, accessible by the public.
If the trust is a UK trust it will have to register on the TRS (as all UK trusts are obliged to register on the TRS); if it is a non-UK trust it will not have to register on the TRS.
Trust acquiring UK land through a non-UK nominee company
The non-UK nominee company will have to register on the ROE. Where the nominee company's shares are held in a trust, then any person who has significant influence or control over the trust will be treated as a beneficial owner of the overseas (nominee) entity and their details will be included on the ROE. Information on the trust, the settlor and beneficiaries of the trust and certain other persons who have powers over the trust must also be provided to Companies House; this trust information is not, however, accessible by the public.
If the trust is a UK trust it will have to register on the TRS (as all UK trusts are obliged to register on the TRS). If it is a non-UK trust it will also have to register on the TRS, but when that obligation arises will depend on the circumstances.
If the nominee company's shares are not held in the trust, then it is the beneficial owners of the nominee company (e.g. major shareholders) who are reportable on the ROE. It is common for professional trustees to hold property via nominee companies within their own corporate group - this means that information on a non-UK trust (for which the property is held) would often not to be reportable with this form of ownership structure.
No definition of "beneficiary" is provided in any of the relevant legislation, however, guidance has been published by HMRC in relation to the TRS and by Companies House in relation to the ROE.
Under the ROE legislation, where a class of beneficiaries is included in the trust the rules do not allow for a description of the class to be provided rather than details of the individuals who are within that class. The ROE guidance states that where there is a class of beneficiaries, if members of the class can be identified individually by the trustees each of them must be recorded as a beneficiary. The overseas entity is not expected to provide details of a beneficiary who cannot be identified by the trustees; it must record as much information as it has been able to obtain, and provide a statement as to whether the entity has reasonable cause to believe that there is required information about the trust that it has not been able to obtain. The guidance states that "if the beneficiaries are a distinct group such as “the grandchildren of Mr. Silva”, it is reasonable to expect the trustees to be aware of the identity of each individual. Therefore, they should be recorded as individual beneficiaries. It is only when beneficiaries cannot be reasonably identified by the overseas entity that they do not need to be recorded."
This is in contrast to the position in relation to the TRS where the relevant regulations expressly provide that where the beneficial owners of a trust include a class of beneficiaries, not all of whom have been determined, a description of the class of persons who are beneficiaries or potential beneficiaries under the trust can be provided.
So, there are practical difficulties where trust information is reportable to Companies House under the ROE legislation. Firstly, all identifiable beneficiaries need to have their identities verified by the reporting agent, which alerts them to their status under the trust (if they did not already have full information). Secondly, the inability to give a class description can mean that there is a need to report on and verify a large number of beneficiaries.
Individuals with 'control' over the trust
Where a trust holds an interest in UK land through an overseas entity such that the trust would be a beneficial owner of the overseas entity if it were an individual, the details of any person that has the right to exercise, or actually exercises, “significant influence or control” over the trust will have to be included on the ROE (and their details will be accessible to the public).
In relation to the TRS, details of any person who has control over the trust will have to be provided to HMRC but their details will not be accessible to the public.
For both the ROE and the TRS, a person will be treated as having control over a trust if they have power to appoint or remove the trustees or a beneficiary, direct the distribution or investment of trust property, amend, revoke or terminate the trust, or direct, withhold consent to or veto the exercise of any of those powers. The guidance also provides that even if a person can only exercise any of the specified powers jointly (rather than independently) they will still be considered to have significant influence or control over the trust.
In relation to the ROE, the relevant legislation provides that information on each person who has at any time been a registrable beneficial owner in relation to the overseas entity by virtue of being a trustee of the trust must also be provided to Companies House. This requires information to be provided on former trustees of the trust. The ROE technical guidance for registration and verification appears to attempt to significantly broaden the scope of this requirement in a way which would potentially require information to be provided on any person who has had "significant influence or control" over the activities of the trust since the rules came into force – for example, a former protector who had power to appoint and remove trustees. The guidance states that information has to be provided "for every person who has at any time been a registrable beneficial owner of the overseas entity by virtue of their relationship with a trust,…". This does not reflect the provisions of the relevant legislation which clearly limit the requirement to former trustees of the trust.
If you have any questions on the registration obligations for trusts acquiring UK land and how they affect you, please get in touch.
This article forms part of a series on transparency issues, including articles covering:
24 April 2023
26 April 2023
10 May 2023
16 May 2023
by Alison Cartin and Alexander Erskine
by Alison Cartin and Alexander Erskine
by multiple authors