Thu 19 Aug 2021

Legal update for SIPP and SSAS providers

Register of persons holding a controlled interest in land: Five years after the initial consultation and following a delay due to the Coronavirus pandemic, the Scottish Government has confirmed that The Register of Persons Holding a Controlled Interest in Land ("the RCI") will come into force on 1 April 2022.

Why is Scotland getting another new register?

As we reported previously for a variety of different reasons, it can be helpful (or necessary) to know who owns or controls a particular building or piece of land. 

However, simply looking at the title deeds or the publicly available property registers won't always give a sufficiently clear answer about who ultimately controls the land or building and who makes the decisions in respect of it. It is to this end that the Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021 ("the Regulations") were passed, their primary aim being to improve transparency when it comes to land ownership in Scotland. 

Who will the regulations affect?

The Regulations apply to owners of land and tenants of registrable leases (leases of over 20 years) in Scotland where there is someone else with significant influence or control over the decision making in relation to that land and that controlling interest is not transparent.

Whilst the person named on the property register as owner or tenant will often be the person who makes the decisions in relation to that land, this isn't always the case. The Regulations are therefore likely to apply to a wide range of landowners and tenants, and in particular will have an impact on overseas entities, partnerships and trusts. 

Where the Regulations apply, the owner or tenant must submit for inclusion in the RCI their details, details of the property and details of the controlling person - referred to in the Regulations as the "Associate".

Where an Associate is an individual the details required include their name, address and date of birth and where an Associate is a non- natural person, for example a company, the RCI will include its name, registered office address and any registered number.

The duty to register Associate information will not only arise on a change of ownership but will arise for existing owners and tenants when the Regulations come into force. There are also on-going duties to update the RCI when someone ceases to be an Associate, or the owner or tenant ceases to be a person to whom the Regulations apply, or any information held on the RCI changes.

The Regulations will not require double reporting for entities subject to other regimes, for example the People with Significant Control Register, as the Scottish Government does not want to duplicate existing publicly available information.

Why is this relevant to SIPP and SSAS providers?

Title to property held by a SIPP or SSAS is normally held by the pension provider (and sometimes the member(s)) as trustee(s) for the benefit of the pension scheme.

In terms of the Regulations, where title to a property is held by a person as a trustee, the Associates (the controlling persons/entities whose details need to be included in the RCI) include any trustees of the trust who are not among the trustees who are named in the title or lease, and any individual who has the right to exercise, or who actually exercises, significant influence or control over the title holding trustee or the trust.

Who has significant influence or control?

The Regulations provide that in the context of trusts, persons with significant influence and control include those who:

  • have the right to appoint or remove a trustee (other than by application to court);
  • have the right to direct the distribution of assets or funds, or to direct investment decisions of the trust;
  • have the right to amend the trust deed;
  • have the right to revoke the trust; or
  • otherwise have significant influence or control over the decision-making of a trustee or trust, particularly in respect of the trustee's or trust's dealings with the land.

Beneficiaries of a trust are not considered "Associates" purely by virtue of being a beneficiary, however if they are engaged in the control or governance of the trust then they would need to be registered as an Associate on that basis.

Whilst currently it is common for SIPP providers to take title to properties as sole trustee without giving away the identity of the member or beneficiary, this may not be possible once the Regulations come into force. SIPP and SSAS providers will need to carefully consider the relationship between the member and the provider to establish who has "control" or "significant influence" in terms of the Regulations. More complex scenarios will arise where a pension scheme purchases jointly with other parties including other SIPP/SSAS structures, companies or individuals and the extent of reporting required under the Regulations will again need to be carefully reviewed.

What happens if you don't comply?

Failure to comply with the duties under the Regulations will be a criminal offence with the penalty being a fine of up to £5,000.

Although the Regulations come into force on 1 April 2022, there is a one year transitional period during which the penalties for failure to comply will not be applied.

Be prepared

The Regulations are complex and there are many traps for the unwary. Registers of Scotland, who will be operating the RCI, has recently published a new information page which will be updated regularly in the run up to the introduction of the Register.

We will be working with Registers of Scotland and others to try to ensure that the guidance produced is as clear and user friendly as possible so that those affected will understand the extent and scope of their reporting duties and will not inadvertently fall foul of the Regulations.  

The introduction of the Register is likely to have a significant impact on SIPP and SSAS providers. Whilst the 12-month transitional period is to be welcomed, it would be prudent to start thinking about how property holding pension structures will be affected by this new legislation in advance of the 1 April 2022 start date.

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