My client has handed me a confirmation from the trust register showing that they have registered a trust of which she and her brother are listed as the only trustees and the only beneficiaries. She tells me the trust is a bare trust. My view is no trust exists as legal and equitable ownership have merged. Am I missing something?
My firm deals exclusively with Discounted Bare Gift Trusts, albeit with ‘offshore’ trustees and ‘offshore’ trustee held investment Bonds.
You’re right to be sceptical.
A “bare trust” in English law is one where the trustee holds legal title but has no discretion — the beneficiary (or beneficiaries) has an immediate and absolute right to both the income and capital of the trust. The trustee is essentially a nominee, doing whatever the beneficiary instructs.
In your client’s case:
- The fact that the same people are both trustees and beneficiaries is not fatal to a bare trust — that’s possible.
- However, for it truly to be a bare trust, the beneficial interests must be:
- Fixed (not discretionary),
- Identifiable from the outset, and
- Immediately available to the beneficiaries without restriction.
If the trust deed (or the surrounding facts) give the trustees any discretion (e.g., powers over when to distribute, investment decisions beyond mere mechanical management, powers to add or remove beneficiaries, etc.), then it’s not a bare trust. It would then be something more complex — typically a discretionary or interest-in-possession trust — and it would attract very different tax treatment (e.g., relevant property charges at 10-year anniversaries, entry and exit charges, etc.).
Tax Advantages?
- A true bare trust offers no tax sheltering.
- For income tax and capital gains tax purposes, the underlying beneficiaries are treated as owning the assets directly.
- The trust itself is transparent for tax.
- If this trust is not a bare trust but something else, it may actually expose them to additional tax, not advantages.
Thus, if your client is hoping for tax benefits because they have registered it, they are mistaken. Registration with the Trust Registration Service (TRS) is now simply an administrative requirement — it doesn’t affect the underlying nature of the trust or provide tax advantages.
Summary:
Same people being trustees and beneficiaries could still be a bare trust.
But only if the trust gives them immediate, fixed rights without discretion.
If there’s discretion, it’s not a bare trust.
Registration alone brings no tax benefit.
You are correct that no tax advantage flows automatically from this structure.