Introduction

The UK government has launched a consultation on the proposed public disclosure of trust and beneficial ownership information where trusts are involved in UK land ownership structures. The consultation, which closes on 21 February 2024, builds upon the government's introduction to date of the Register of Overseas Entities and the Trust Registration Service.

The Current Position

The UK government currently has three main regimes in respect of economic transparency:

  • the People with Significant Control (PSC) register – a public register on UK Companies House of the beneficial owners of UK companies and LLPs.
  • the Trust Registration Service (TRS) – a requirement to file trust information with HMRC in relation to UK trusts and certain qualifying non-UK trusts. This information is not generally accessible by the public. For further information on the Trust Registration Service and its application to UK real estate, please click here for our guide.
  • the Register of Overseas Entities (ROE) – a public register on UK Companies House of the beneficial owners of overseas entities that are registered proprietors of UK land. The ROE was introduced recently by the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA), with further amendments brought in at the end of last year by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). For further information on the ROE and the changes brought in by ECCTA, please click here for our guide.

To date, the above regimes do not provide for public disclosure of beneficial ownership of trusts. The UK government considers this to be a notable gap in their ambition to create ownership transparency, particularly in respect of the ownership of UK land.

The Proposals

ROE trust information

Firstly, and to be implemented irrespective of this consultation, the UK government has confirmed that (as provided for by ECCTA) they will be introducing regulations later this year that will allow applications for access to trust information held on the ROE (which is not currently publicly disclosed).

The current consultation seeks views on whether such ROE trust information should be publicly available by default (ie no application would be needed). The consultation puts forward three primary options:

  1. Publicly available by default: all trust information on the ROE would be publicly available by default, except for protected information.
  2. Partially publicly available by default: some more sensitive trust information (possibly details of beneficiaries) on the ROE would remain private.
  3. No change in public availability: access to trust information would only be available to a third party by way of application.

General trust information in UK land ownership structures

The consultation also goes beyond the ROE, inviting views on improving transparency more generally for trusts not associated with ROE entities. These changes could apply to any trusts (whether onshore or offshore) and at any level in the ownership structure of UK land.

The consultation puts forward five options for such transparency:

  1. Retain existing practices: the status quo regarding trust information access would be maintained (ie the TRS and ROE, but without any new public disclosure for trusts).
  2. Increased transparency for non-UK trusts: extend transparency principles to information held elsewhere, specifically for non-UK trusts owning UK land.
  3. Minimum disclosure: publish the minimum trust information necessary for public reassurance. All other information would remain private.
  4. Minimum disclosure with legitimate interest test: publish the minimum information necessary, with further access possible on application through a 'legitimate interest' test, allowing specific individuals or entities access based on defined criteria.
  5. Maximalist Approach: publish all information collected about trusts by default, embracing the highest level of transparency.

Comment

Whilst the changes remain proposals at this stage, the approach that the UK government is currently looking to take is to deal with certain loopholes to an effective land ownership register – and trusts in ownership structures are viewed as the primary loophole at this time.

Although we don't have any details as to the exact nature of the changes, it seems likely that the government will look to use the existing ROE and TRS in order to bring through such transparency. Real estate investors with trusts in their ownership structures (including Jersey/Guernsey Property Unit Trusts or nominee arrangements) may therefore wish to ensure they are in compliance with the ROE/TRS as it currently stands, and give some further thought as to how the above options for increasing transparency could affect their existing structures.

The government acknowledges that there is a fine balance to be achieved here between disclosure of information in the public interest, and the protection of personal information, the release of which would not satisfy the overriding public interest principle. Trust structures are common in private wealth and it would seem appropriate that there are some limitations to the information published on individual trust beneficiaries (particularly where this involves minors). However, the maximalist approach suggested at option 5 above would not only release huge quantities of currently private information into the public domain, but would also constitute a significant move away from the established principle of the Register of Title held by HM Land Registry reflecting only the legal ownership of a property, and not looking behind the so-called "curtain of legal ownership" so as not to confuse the conveyancing process.

The consultation runs until 21 February 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.