UK TRS rules changed to include Jersey property unit trusts

Until last week, HMRC's guidance had stated that neither authorised nor unauthorised unit trusts had to be registered, because HMRC did not consider them to be express trusts. The new amendment says unauthorised unit trusts need to register if they meet the general registration requirements, which are likely to apply to Jersey property unit trusts (JPUTs).

Such trusts are likely to be liable to at least one UK tax, most likely stamp duty land tax (SDLT), rather than income tax or capital gains tax, because of the typical tax treatment of JPUTs holding UK real estate. This liability triggers the registration requirement for JPUTs that acquired an interest in UK land on or after 6 October 2020.

It is not only those who are managing existing JPUT structures or setting up new JPUT structures who will need to consider registration, says law firm Bryan Cave Leighton Paisner. Buyers of UK real estate who are buying into a pre-existing structure may also consider it, as will lenders to such structures. The registration requirement for taxable trusts applies in respect of relevant tax liabilities arising from tax year 2016/17, so it applies to JPUTs that have had a liability to pay SDLT as far back as that fiscal year. A JPUT landlord who pays chargeable consideration for a surrender of a lease will also trigger a liability to pay SDLT and thus an obligation to register the trust.

Trusts that were in existence on or after 6 October 2020 but have since been terminated also have to be registered, so trustees will also need to consider JPUTs that have been wound up.

HMRC has given undertakings that it will not impose 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. Penalties for deliberate non-compliance could be as high as GBP5,000 per offence.

Sources

• Bryan Cave Leighton Paisner
• DLA Piper
• CMS Law
• HMRC (updated guidance)