January 16, 2024 Land Ownership and Trusts – does the bright light of transparency beckon?
Introduction
On 27 December 2023, the government published a consultation titled ‘Transparency of land ownership involving trusts’ which seeks views on whether the amount of information publicly available about who owns and controls land should be increased and how. The consultation is open until 21 February 2024.
Given the stage of the current political cycle in the UK, with a general election due no later than January 2025, it is questionable whether any of the proposals contained within the consultation will progress anytime soon. The consultation itself was published without fanfare between Christmas and New Year to satisfy an undertaking the government had made to consult on these issues during 2023.
Nevertheless, for those potentially impacted by the consultation it is clear that the direction of travel is very much towards greater transparency.
As a regulated agent for the purposes of the UK Register of Overseas Entities, Elemental will follow these developments closely and keep our clients updated regarding any new requirements that are introduced.
The government’s case for change
The consultation explains the current systems in place to establish the legal owners of land and, where that owner is a company or trustee, the sources that contain information about those behind such companies or trusts.
HM Land Registry (HMLR), the Register of People with Significant Control over companies (PSC), the UK Register of Overseas Entities (ROE) and the Trust Registration Service (TRS) are the main sources highlighted.
The government believes the lack of open public access to trust beneficial ownership, especially relating to land ownership, is an unacceptable gap.
Three overriding principles underline this belief:
- Greater transparency of land ownership where trusts are involved is a matter of public interest.
- Greater transparency will support a housing market that better delivers for the public.
- Transparent ownership can help with tackling illicit finance and corruption.
The government believes that there is a strong case for changing the current transparency arrangements of trusts, specifically where land ownership is involved, and that trust transparency should be brought in line with companies.
Enhancing transparency
Elemental is the leading regulated agent in respect of the ROE and has assisted many overseas entities, including those with trust structures, to successfully register since the regime came in force in August 2022. Additional trust disclosure requirements have already been written into law and will be coming into force soon, for further details see our previous article on the ECCTA ROE changes.
Whilst the trust information submitted up to now has not been made public, there are also powers for the Secretary of State to make regulations enabling applications to be made for public access in circumstances to be specified in the regulations. These are expected in the next few months.
Balanced against these reforms is the expectation that the government will expand regulations permitting application to Companies House for the protection of all information relating to a given individual to enable persons connected with a trust to apply for protection in circumstances that are wider than a risk of harm or violence (for example, for minors and vulnerable persons).
Despite these planned reforms, the government is seeking opinions on whether full or partial trust information should be made public by default except for protected information.
Privacy vs Transparency
The government acknowledges that there is a balance to be struck between transparency and privacy. Trusts are inherently private arrangements often used for legitimate purposes such as distributing assets within a family and so is seeking to understand the minimum amount of information that is necessary and proportionate whilst avoiding unacceptable invasions of privacy.
Five options are presented:
- Retain the existing practices relating to accessing trust information.
- Increase transparency of non-UK trusts holding UK land
- Publish the minimum information necessary to meet the three overriding principles and retain current privacy practices for all other information.
- Publish the minimum information necessary to meet the three overriding principles and increase access to further information through an expanded “legitimate interest” test.
- Publish all information collected about trusts by default.
It is highly unusual for the minimalist (option 1) or the maximalist (option 5) options to be taken forward following these types of consultations so on this basis alone one may conclude that it is likely that any future reform will focus on some measure of increased transparency.
Conclusion
There has been a significant amount of reform in this area in recent years with the introduction of the ROE and the TRS and it remains very much at the forefront of the government’s thinking.
Given the extent of recent reforms, we would expect there to be a bedding-in period during which no further obligations are imposed in the short term.
However, Elemental expects the transparency requirements relating to trusts that own land to increase in the medium to long term and will be well placed to provide advice to ensure that you remain compliant.
We recommend that trust records be kept in a clear and accessible format to make compliance with any future transparency requirements as straightforward as possible.
