Tax Alert: UK Trust Registration Service: what does it mean for JPUTs?
In a nutshell
HMRC has updated its guidance to make clear that unauthorised unit trusts do not benefit from an automatic exemption to register under the UK’s Trust Registration Service (TRS). Property unit trusts (such as a Jersey Property Unit Trust (JPUT)) that have a liability to UK tax (e.g. SDLT), or that acquire land, on or after 6 October 2020, will now be required to register under the TRS.
The TRS was introduced to increase transparency around the beneficial ownership of trusts and requires the trustees of UK and non-UK trusts that are liable for certain UK taxes to register and provide information to HMRC’s online TRS. In response to the Fifth Money Laundering Directive, the TRS was extended and now requires the registration of the following non-taxable trusts (unless an exemption applies):
- UK express trusts;
- non-UK express trusts that acquire land in the UK on or after 6 October 2020; and
- non-UK express trusts that have at least one UK-resident trustee and that enter into a “business relationship” in the UK on or after 6 October 2020.
HMRC’s position on unauthorised unit trusts
In an update to its guidance, on 31 January 2023, HMRC clarified that there is no specific exclusion for unauthorised unit trusts. Accordingly, property unit trusts, such as JPUTs, are very likely to fall within the scope of the TRS and will have to register if they meet the general requirements. This is marked change from HMRC’s previous guidance which provided that both authorised and unauthorised unit trusts were not required to register on the TRS.
As a non-UK trust, a JPUT will fall within scope of the TRS as either a taxable or non-taxable trust if:
- the trustees have been liable to pay a relevant UK tax on UK source income or assets – the most likely UK tax that applies in practice being SDLT; or
- the trustees acquire an interest in UK land on or after 6 October 2020.
Registration process and penalties
For registrable non-taxable express trusts formed on or after 6 October 2020, the TRS requires registration within 90 days of becoming registrable, or on or before 1 September 2022 (whichever is later). This includes trusts that were in existence on or after 6 October 2020 but have since been terminated, and so trustees will also need to consider property unit trusts that have been wound-up.
Registrable taxable trusts created on or after 6 April 2021 must register within 90 days of becoming registrable, or by 1 September 2022 (whichever is later). For registrable taxable trusts created before 6 April 2021, the deadline for registration is 31 January following the end of the tax year in which the trust had a liability to UK taxation.
In recognition of the fact that the registration requirement is a relatively new and unfamiliar obligation for many trustees, HMRC has confirmed that it will not apply a penalty for a first offence of failure to register or late registration of a trust unless that failure is shown to be due to deliberate behaviour on the part of the trustees (in which case the fine is £5,000).
Although the registration requirement will require trustees to review unit trust structures back to 6 October 2020 (even those that have since been wound-up), certainty on registration is at least a welcome development. Given the previous ambiguity as to whether JPUTs (and other unauthorised non-UK unit trusts) were within scope of the TRS, we would expect HMRC to be pragmatic in not levying penalties for late registration. That said, those affected, should ensure that they do not delay in their online registration.