Farmland, farming partnerships and trust registration rules

Farming partnerships are likely to be particularly affected by the new trust registration rules and a review of how land is held should be undertaken to determine whether there are registrable trusts. New rules for registering trusts came into force in October 2020. Non-taxable trusts in existence on or after 6 October 2020 must be registered by 1 September 2022 (even if they are now closed). Non-taxable trusts created anytime from 90 days before 1 September 2022 must be registered within 90 days of creation. 

Partnerships cannot hold property themselves, so land and assets are often held by partners in trust for the Partnership, with the beneficial owners being the Partners. This arrangement, often driven by tax and succession planning, regularly results in a co-ownership trust where the legal owners (A & B say), hold the land on trust for the Partners (A, B & C for example).  

Co-ownership trusts, where the legal and beneficial owners are not the same, are registrable trusts under the new rules. 

There are a few exemptions, including where:

• land is held by individuals for the benefit of themselves and no one else
• land is owned by two or more people and one of them is under 18
• the beneficial interest in land is owned by more than 5 people, but only 4 of them hold the legal title as a result of the Land Registry only permitting 4 names on the legal title

However, as soon as any changes are made to these ownership structures, such as adding new partners to a partnership, or following transfers or gifts, it is likely that the exclusion will no longer apply, and the co-ownership trust will have to be registered within 90 days of that change.  

Any co-ownership trusts caught by the rules will need to be registered in accordance with the rules above and the register kept updated, for example when partners change or land is purchased, sold or gifted, regardless of how long the ownership structure has already been in place. Trust registration should also be a factor to consider when purchasing land or considering ownership structure in the future.

Should you require assistance in relation to farming business trusts, please contact Tracey Irvine, part of our Agricultural Team, on 01206 217316 or tracey.irvine@birkettlong.co.uk for a free 15 minute telephone consultation.