We’ve published a blog about the upcoming 1 September 2022 deadline for the registration of various types of trust with HMRC. These include trusts which may be relevant to farmers, making that blog worth a read.
In 2017 the UK implemented domestic legislation to comply with the fourth EU directive on anti-money laundering “AML4”. Under that legislation a requirement was put on trustees of taxable trusts to register using HMRC’s Trust Registration Service (“TRS”).
The legislation has now been extended to comply with the fifth EU directive “MLD5” such as to require registration of all express trusts, regardless whether they have a tax consequence, unless spared from registration by one of the narrow group of exclusions.
Where land is owned by or on behalf of more than one person, this shared ownership is achieved by a form of trust. Since the ownership of land is always required to be in writing, that trust is an express trust meaning the arrangement is potentially in scope of the requirement to be registered on TRS.
HMRC list the types of co-ownership arrangement excluded from registration in their manual here, the headlines being:
- Where trustees and beneficiaries are exactly the same persons
- Where land is held partly or wholly for persons under age 18 (the exclusion expiring when the person reaches 18)
- Where land is held by more than four persons and only four are named on the Land Registry title (four being the maximum number Land Registry will accept).
With farming continuing to be dominated by businesses run as partnerships it is usually the case that property on the partnership balance sheet is owned by one or more of the farm partners for the benefit of one or more of those partners.
Where, for example, Mum and Dad have both legal and beneficial ownership of a piece of land the exclusion under bullet point 1 will apply. But where, for example, a son or daughter is given a part interest in that land but the legal title remains with Mum and Dad, the exclusion no longer applies (two trustees, three beneficiaries) and the arrangement becomes registerable on TRS.
We anticipate that a large number of farm clients hold assets in a manner that will give those clients a requirement for registration by 1 September 2022. Worse than that, some clients may have several parcels of land under differing arrangements, each of which is registerable.
Once registered as a non taxable trust, further updates to TRS are required on the occasion of a change in e.g. trustees, beneficiaries, or trust asset.
The next step
To discuss whether an arrangement is caught by the new requirement or to seek our assistance in registering any trusts ahead of the 1 September 2022 deadline, please get in touch with your usual UHY contact.