02 August 2022
New rules requiring the registration of trusts by 1 September 2022 could catch out many general practitioner (GP) and farming general partnerships that own land and property where some or all of the individual partners act as trustees.
The introduction of the Fifth Anti-Money Laundering Directive (5AMLD) has substantially extended the scope of the trust registration service (TRS). With some limited exceptions, most trusts and trust arrangements now are required to register with HMRC by 1 September 2022 (or within 90 days of the trust being created or no longer qualifying for an exemption if this is later).
A very common scenario that may be impacted is a family farming partnership where partners hold the farmland on behalf of the partnership itself. A general partnership is not typically a legal entity (other than in Scotland where they do have separate legal personality) and may not be able to hold the legal title to the land. The individuals involved may not even realise that what they have is in fact a trust arrangement that now needs to be reported. Unless specifically exempt, such cases may potentially be caught by the newly introduced 5AMLD.
There are some potential exclusions. For example, in England and Wales, it is only possible for a maximum of four persons to be listed as the legal owners of land. Where land is held by more than four persons, the Law of Property Act 1925 provides that the land is held on trust for all persons who have a beneficial entitlement to the land. Trusts created as a result of this are excluded from the requirement to register.
If an exemption or exclusion doesn’t apply, a registration with HMRC’s TRS is required by 1 September 2022, to avoid a late registration penalty and potential reputational damages. This is irrespective of whether there is a written declaration of trust, or the ‘trust’ arrangement has arisen without any written document at all.Penalties can apply for missed deadlines and could potentially generate significant additional penalty revenues due to a lack of awareness of the requirements.
The registration process involves several steps and trustees who are required to register will need to ensure they have the required information for every beneficial owner, and that it is accurate and up to date.
Where action is required, it is advised that this is not left too close to the ‘back to school rush’.