Simple questions I hope:
If both a principal beneficiary and a life tenant of a trust have died, leaving only one life tenant, do they all still need to be added to the TRS, or is it just the remaining life tenant?
Also, if the trust holds a charge on a property, is that a “yes” to the question “Has the Trust acquired UK land or property since 6 October 2020?”
The questions are simple but the answers not necessarily so. There are inconsistencies within the Regulations and HMRC practice per TRSM.
1 The information, if any, is that is to be provided in relation to a dead person is not always clear. Reg 6 (1) defines a “beneficial owner” in relation to a trust to “mean” a person in a list. The use of “the” before settlor, trustees and beneficiaries could mean the current ones who are presently alive. Surely it cannot include the dead for some of them but not others. This is the HMRC interpretation of settlor in TRSM32040 who can be dead but they do not appear to care about dead trustees or beneficiaries. Reg 6(1)(e) includes "any individual who has control over the trust: surely that cannot be read as "had"control.
Reg 6(6) makes a beneficial owner in relation to an estate in administration the executor or administrator, so by implication, not the deceased. What if he was the settlor of a will trust? It seems 6(1) would apply
2 TRSM 32020 asks whether a trust has acquired “land or property”. The first point is that this question should only be addressed to the trustees of a non-UK trust not to every trust. A taxable trust must describe its “assets”. Asset is not defined but the address of any “property” is required byReg 45(5)(c).
The second point is that “land or property” is not defined in the Regs. Nor in the parent FSMA 2000. “Real property” is defined in Reg 3 (2)(c) but only to include Scotland. The IA 1978 definition of land is not much help. The LPA 1925 s 205 definition of “land” is rather better (if you ignore the confusing definition of “property”).
I am not a property expert but my understanding is that s87 LPA and s51 LRA 2002 confer rights on a legal mortgagee “as if” they were the owner of a term of years so my expectation is that they do not own land itself and s1 LPA 1925 puts charges in subsection (2) (c) as “interests or charges in or over land” and not in subsection (1) as “estates in land”. Of course this pre-supposes that a court would apply the LPA definition.
What HMRC would make of it I cannot say but the subtlety of the argument may well be Greek to a Level 1 or 2 operator and at a higher level it is almost certainly yet another thing they should have thought about but haven’t. It highlights the increasing use of important terms in Acts and SIs without supplying a definition and I usually ponder (as a conspiracy theorist summa cum laude) whether this derives from rank stupidity and incompetence or a cunning plan. Compare legal documents which often contain clauses comprising a mass of defined terms and a definition clause of enormous length drafted as far as humanly possible to head off disputes over interpretation. Government doesn’t seem to care about that objective.
Jack Harper
S45ZA(2)(b)(ii) of SI 2017/692 (as amended) refers to trustees of a “type B” trust and asks whether the trustees "acquire[d] an interest in land in the UK.
Reg 42(5)(a) provides that trustees acquire an interest in land in the UK when, inter alia, one of the trustees becomes registered (a) in the register of title kept under the LRA 2002. as the proprietor of (i) a freehold estate in land or (ii) a leasehold estate in land…".
Unless either (i) or (ii) applies, the Trustees holding a charge could I suggest answer “No”.
Malcolm Finney
Apologies to all and thanks to Malcolm. The comment about why a charge is not an esate in land seems to stand. What about unregistered land then?
Jack Harper
Jack
While it may not be deliberate, I imagine that if a trust is registrable because it directly acquires land after 6 October 2020 (or thereabouts), registration of the acquisition at HMLR would be mandatory.
(quite possibly a happy accident)
Andrew
I think the clue in Reg 42(5) is the word “becomes”. The transfer of either of the two estates, or a grant of the second, would trigger compulsory first registration under s4 LRA 2002. As a card-carrying pedant I note that the requirement is “becomes registered” not “becomes registrable”. Trustees are perhaps unlikely to risk not registering given the dire sanctions in s7 but the TRS obligation seems only to attach upon actual registration, after examination of title is complete. “Acquisition” is equated with the outcome of becoming registered not of acquiring the land. What about the effect of s74 that registration is retrospective to the date of making the application?
What if the legal estate is conveyed to a nominee for the trustees or is already held by such a nominee who then holds for the trustees? In the first case the nominee is likely to be a bare trustee who must register but in the second case there would be no need to change the registration apart from a restriction (see 8.3 PG 24).
Jack Harper
By using the term “becomes registered” in the TRS Regs to define when an acquisition in UK land occurs I think seems sensible. Actual registration at LR is a point in time easily identifiable whereas “becomes registrable” is perhaps less clear. And, in any event, failure to actually register is unlikely, as you say, given registration at LR is mandatory (re first registration of an unregistered legal estate) with any failure resulting in the disposition being void [LRA 2002 s6(4)].
I agree that the consequence is that an “acquisition” is thus equated with registration.
I don’t think s 74 is a problem. S 74 is relevant for LRA purposes only having no impact for TRS purposes. S 42(5)(a) is clear, s 74 having no impact.
Malcolm Finney
Not so fast Malcolm! TRS has chosen to tie the meaning of “acquisition” to land registration (and not what it means for SDLT or the CGT rules for a disposal for example). s74 is an integral component of that process. You can’t incorporate the bits of the process you like and leave out the bits you don’t. One of my friends recently experienced a very long delay in registration because on his purchase his then solicitors had allowed a first registration of a new build to be made with the wrong house number on the right plot. One hopes this issue will be less relevant now that 90 days and not 30 are allowed. Trustees are entitled to know exactly what “becomes registered” means in terms of timing of the event. Does time start running when an application is made if it is ultimately successful? Like disposal under a contract for CGT.
Jack Harper
Jack, I have seen through your tactics of wearing down the opposition and it certainly is effective. However, I’ll be back…
Malcolm Finney
Prolixity and turgidity are also formidable allies!
Jack Harper
For a “type B” trust which satisfies Reg 45ZA(2)(b)(ii) (ie acquisition of interest in UK land) Reg 45Z(5)(b) requires information to be provided within 90 days (assuming later) of the trust falling within 45ZA(1)(b) ie a type B trust acquiring interest in UK land.
The acquisition occurs when the trustees become registered under LRA 2002.
The 90 days therefore applies to the 90 day period following the date of register with LRA.
S74 LRA 2002 provides that an entry made in the Register has effect from the time of making the application to register.
It would not make sense, and I don’t believe the Regs do, to start the 90 day period from the date of the application and I do not think they in fact do that. It seems to me clear that the 90 day period can only start from the date of entry on the register.
S74 may give rise to other implications re property law but don’t bite for TRS purposes.
I don’t think I’m cherry-picking.
Malcolm Finney
This is a highly respectable argument. I hope that no trustee will ever be required to advance it and that HMRC would not instruct Crown Counsel to put forward my answer in rebuttal. The fact that each of us can offer a tenable but contrasting view indicates to me that the issue is surely another thing that should, or at least might, have been considered and resolved before the SI was published. Any decent lawyer understands the perils of incorporation by reference.There are other similar and even weightier such issues of course.
I understand from the splendidly communicative ATT that the ridiculously uncommunicative HMRC are still not yet responding inter alia on whether the termination of the administration period more than two years after death involves a registrable trust if all the estate assets are destined for one or more beneficiaries absolutely. On here there has been much speculation about the effect of the use of the specific words “on trust” when, as in such a case as the above, they are arguably superfluous.
They will not always be. I have found an example where they make a legal difference. It is a little obscure but remains illustrative of the basic point. It concerns the topic of whether a gift by Will carries income or interest. Where a contingent or deferred pecuniary legacy is given to a minor child by a parent, or person in loco parentis, as an exception to the general rule it carries interest from the date of death, to allow maintenance, but not if the legacy is given to trustees upon trust for the child, when it runs from when the legacy becomes payable; on fulfilment of the contingency from the deferral date. The case law is over 80 years old. It may not have reached Somerset House yet.
Jack Harper