Trust registration service and the impact on GP partnership property
Since 2017 trustees have had obligations to register and provide information about trusts and their beneficiaries to HMRC’s Trust Registration Service (the TRS). Originally the TRS was a register of trusts liable to pay certain taxes and was established to fulfil the UK’s obligations under an EU money laundering directive. Then in October 2020 the TRS was extended to bring the acquisition of property into the trust registration regime. It is, however, the coming into force on 1 September 2022 of further regulations relating to the registration of express trusts that has caused the most concern and comment. Since 1 September, all UK express trusts must be registered unless covered by a specific exclusion.
The legislation lists the types of trust that are out of scope for registration. In the context of GP property, the key exemptions are found under the heading of co-ownership trusts.
As property cannot be held in the name of the partnership, it is regularly held by one or more partners on trust for the whole partnership. GP partnerships will therefore often use a co-ownership trust structure to hold their real property and other assets.
Where partners co-own the property for themselves so that the trustees and beneficiaries are the same then the trust created in this way is excluded from registration.
However, it is often not the case that the property-holding partners are the only beneficiaries of the partnership property. Other exemptions from registration may still be available in this situation.
More than four co-owners of property
Where partnership property is owned by more than four co-owners, statute limits the number of holders of the legal estate in the property to four. Therefore, in such a situation, a trust is created under which the first four named in a transfer or lease of the property hold it on trust for all the partners. Even though the trustees and beneficiaries are therefore not the same, this is another form of trust that is excluded from registration.
Partnerships without a written agreement
In the absence of a written partnership agreement, section 20-21 of the Partnership Act 1890 provides a presumption that any property purchased with partnership funds belongs to the whole partnership. Partnership property held in this manner does not create an express trust and is therefore outside the scope of the TRS.
Partnership deeds and other declarations of trust
Most GP partnerships in fact operate under a written agreement that governs the terms and dealings of the partnership. It is common practice for these agreements to contain an express provision establishing that any property is held on trust for the whole partnership. Alternatively, these provisions may be contained in a declaration of trust deed or in a transfer or lease of the property to the partners. All these arrangements create an express trust, and it is therefore necessary to register such a trust, unless an exclusion is available.
The exclusion relevant to GP partnerships and other primary care providers is set out in Schedule 3A(23) of the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations). The Regulations provide an exclusion for trusts created for the purpose of enabling or assisting certain public bodies to carry out their functions. Trusts excluded under this provision include those falling within the meaning of a “public authority” under the Freedom of Information Act 2000 (the Act). GPs, NHS trusts and Integrated Care Boards are some examples of public authorities within the meaning of the Act. An express trust created for the purpose of enabling these bodies to carry out their functions, such as holding partnership property, is excluded from TRS registration. The latest update of HMRC’s Internal TRS Manual (TRSM23130) actually uses the example of a GP surgery held on trust by the partners of a GP partnership to illustrate the exclusion available under the Regulations.
Therefore, whilst it was previously unclear, the updated guidance and example now appear to support the view that most GP property-holding arrangements will not create express trusts that are required to register with the TRS.