Trust Registration Service - A reminder for Farming Partnerships

The changes to the Trust registration Service (TRS) have been effective for a little while now. However, while this was initially introduced with a ‘soft landing’ period, there is now a penalty regime in place meaning that it seems like an appropriate time for a reminder.

The TRS is a register of the beneficial ownership of trusts and is managed by HMRC. It contains certain information about each trust and the people connected to the trust, including settlors, trustees and beneficiaries.

Previously, trusts were only required to register with the TRS if they had a UK tax liability. This has since been extended to all UK trusts, unless they meet specific exemptions.

• All trusts with a UK tax liability, regardless of their residency.
• All UK trusts unless covered by one of the exclusions (please refer to the Summer 2022 Newsletter).
• Non-UK resident trusts that acquire UK land or property.
• Non-UK resident trusts that enter into a business relationship in the UK and have at least one UK resident trustee.

Any new trusts should now be registered under the TRS within 90 days of creation, unless covered by one of the exclusions.

A bare trust is the simplest form of trust and is used to hold an asset for a particular beneficiary. Bare trusts are often used where beneficiaries are minors, until they reach an age where they are legally able to take ownership at 18.

It is also common for bare trusts to be used in partnerships, where assets are held by partners in trust for the benefit of the partnership. This is particularly common in agriculture but can affect many other sectors.

All bare trusts should be registered under TRS, unless they meet one of the exemptions.

Farming partnerships do not escape these rules and need to consider their land ownership in case they are affected. LLPs and companies can own land in their own right but partnerships cannot as they are not legal entities. This means that some or all of the partners often hold land as trustees for the partnership.

The benefits of land being held as a partnership asset can be considerable, as partnership property can benefit from 100% Business Property Relief (BPR), as opposed to only 50% relief if owned by a partner who uses it in the business.

BPR is particularly beneficial where the market value of the farmland, or farm buildings, exceeds its agricultural value.

Where land is owned by trustees and the owners on the deeds or at land registry are the same people as the beneficiaries, there is no requirement to register on the TRS. However, in partnership situations, often the legal owners are different to the beneficial owners, the partnership, in which case there is a requirement to register.

If no partnership agreement is in place, or any other express deed, there is no requirement for the partnership to register.

This TRS registration process and due diligence may require administrative work and costs in the short term but will provide clarity when considering inheritance tax reliefs and succession plans in the long run.

As a reminder, if you are within the scope of the TRS, you must:

1. Register the trust with HMRC; and
2. Keep the information held on the service up to date.

HMRC accept that registering a trust is still a fairly new requirement and trustees may not be familiar with the process. HMRC will therefore not charge a penalty as long as action is taken to correct this within the time limit they set.

If you fail to take any of these steps within the given time limit though, HMRC can charge a fixed penalty of £5,000.

If you are concerned that your partnership may be within the scope of the TRS or would like assistance with any of these matters, please do get in touch.