Registration of Declaration of Trust where trust immediately wound up on transfer of propertyr

I would welcome members view on whether a Declaration of Trust needs to be registered in the following circumstances.

A property is owned by H in his sole name. He want to transfer to his son. The property is standing at a capital gain. It has been suggested that H executes a declaration of trust immediately prior to transfer declaring that he holds the property on trust for himself and his wife in equal shares, then utilising both annual allowances against the gain.

There will, for a short period of time, be a situation where the legal ownership as reflected by the registered proprietor named on the title does not reflect the beneficial interests in the property. This would usually require registering if an exemption doesn’t apply. However, the trust will likely be extinguished shortly after creation when the transfer deed is executed.

Will I still need to register?

Is it possible that the trust would be treated as one to facilitate a commercial transaction and fall within the exclusions in Sch 3A (14) as it is ancillary to the overall purpose of the transaction?

I do not believe there is a requirement to register as long as the wife is a trustee as well. The trustees are then the same as a beneficiaries and this is exempt.
See TRSM23050 - Types of trust that need to be registered: contents: excluded express trusts: contents: property ownership - HMRC internal manual - GOV.UK

Thank you for the quick response. However, there is no intention to transfer the property into joint names of H and his wife. He is instead executing a declaration of trust saying he holds the property on trust for H and his wife in equal shares.

Then it’s registrable. No one likes it but non-registration risks penalties. We now have clearer guidance on these When HMRC will issue a penalty charge for not registering or maintaining a trust - GOV.UK

This might be seen as deliberate. If you have £5000 you’ll be OK

Jack Harper

Difficult to see how such 3A(14) could apply here. HMRC TRS’ provides in part “…Where their use is incidental or ancillary to the principal purpose of the transaction…”. In the present case the suggested trust is an integral part of the proposed transaction.

Sch 3A(9) requires joint legal ownership on the part of H and W which is not present here.

Malcolm Finney