New disclosure requirements in relation to UK situations

The Register of Overseas Entities and the Trust Registration Service

1. Introduction
Not long ago, the United Kingdom introduced various new regulations against the background of international efforts to increase transparency in the international movement of capital and in the context of ownership relationships that are more difficult to understand through the use of trusts, foundations or companies. This was also done in connection with the goal of improving measures against money laundering and terrorist financing.
Certainly not insignificant for the speed of implementation of certain rules was the Russian attack on Ukraine and the associated sanctions against a large number of Russian individuals and organisations.
In order to address these challenges now there exist two different registries – one is the Register of Overseas Entities and the other one is the Trust Registration Service (TRS).
The Register of Overseas Entities is part of the UK Companies House and as such the content is publicly available.
In a similar context, but already in 2017 was introduced the so-called UK Trust Registration Service, which imposes certain declaration obligations on trustees in connection with trusts that have UK connecting factors.
This affects both UK resident express trusts and non-UK resident express trusts, i.e. trusts that have been created by a settlor and have not been created by operation of law or a court order.
The obligations relating to the UK Trust Registration Service have become more extensive over recent years.
The reporting requirements are more extensive than for companies owning UK land, but contrary to companies’ house this register is not public.
Exemptions from the requirement to notify the UK Trust Registration Service are narrow and will not apply in most situations where private clients use express trusts.
The introduction of both registries provides for a comprehensive reporting requirement in situations where overseas companies or trusts are used to acquire and hold UK land and properties.

2. UK Trust Registration Service
The TRS is an online reporting system that has been introduced to comply with the requirements of the EU Money Laundering Directives and which imposes on the trustees of certain types of trust the obligation to declare certain information online.
This affects trusts where at least one trustee is UK domiciled or the settlor was UK domiciled or had a UK domicile at the time the trust was created.
Furthermore, there is also a reporting obligation for trusts that do not fall into this category and have, for example, trustees or a settlor who are not UK domiciled but hold taxable assets in the UK, generate income in the UK or have acquired land in the UK after 6 October 2020.
It is the responsibility of the Trustees to comply with the reporting requirements and make the relevant declarations by 1 September 2022.
This declaration must include the following information and details regarding the
–        Trust
–        Settlor
–        Trustee(s)
–        Beneficiaries
–        Protector(s)
There is also an obligation to report UK assets if they are subject to certain UK tax obligations.
Due to the potentially serious consequences of late, incorrect or non-reporting, it is advisable in any case to appoint an institutional trustee.
It is important to stress that access to the information is highly restricted and only available to government agencies, including in the context of combating money laundering or tax offences.

3. Register of Overseas Entities
The Register of Overseas Entities, introduced in March 2022, is designed to ensure the identification of beneficial owners and controlling persons of overseas companies that own or have acquired land in the UK after 28 February 2022.
This is to achieve de facto equality with UK companies or with land owned by individuals, whose identification is easily possible with the help of the land registry.
This affects all foreign companies owning UK land (not making a distinction between residential and commercial property as has been the case in similar rules in the past) unless
–        the company already held them before 1 January 1999, or
–        no beneficial owner holds more than 25% of the shares or voting rights in the company
A foreign company that is required by these rules to report the beneficial owners to the register shall report the following information in respect of all individuals holding more than 25% of the shares or voting rights in the company
–        Name
–        Date of birth
–        Nationality
–        Residential address
–        Reason for registration (e.g. more than 25% shares)
Special cases where, for example, a trustee holds the shares in the company are discussed below.
Registration for affected companies must be completed by 31 January 2023 at the latest and must be carried out by a UK licensed agent (e.g. tax accountant).
Candeo has a network of reliable partners who support us in this.
Late declarations result in severe penalties of £2,500 per day.

4. Special situations
In situations where the shareholder of an overseas company is a trust or trustee, this must be notified to the Register of Overseas Entities and will be registered accordingly, and it will also be necessary to provide the information required for trusts which are UK landed, but which will be treated as more confidential under the UK Trust Registration Service (TRS) and will not be publicly available.
In the past, there was a lack of clarity as to whether so-called bare trusts were also covered by the obligations under the TRS. However, this has now been clarified to the effect that the declaration obligations exist for bare trusts as well as for other express trusts.

5. Summary
It is important to ensure that companies and trusts set up in the past to invest in UK assets are reviewed for compatibility with the new rules and also to ensure ongoing compatibility with these rules and monitoring of possible legislative changes so that in the long term the benefits of these structures can continue to be enjoyed.
This memo does not constitute legal or tax advice and should not be construed or used as such.

We invite you to contact us if you have any further questions or if we can help you with new or existing structures in this context.