HMRC Trust Registration Service

manjac

My wife and I because of our ages decided to start putting our affairs in order and we found we had taken out a Trust Bond in my wifes name in 2004 that upon her death our son would be the beneficiary. We then found out that the trust may have to be registered with the HMRC Trust Registration Service. So I tried to negotiate the HMRC website and register but it keeps asking me for a UTR. It would NOT accept the one I had so I followed their instructions and got another but still it would not accept it. I now have three. I phoned HMRC and after a wait of 40 mins, got through to someone who also could not get the system to accept the UTR and then proceeded to tell me what to do to get a new one and then I got cut off, but thankfully she phoned me back but her instruction was only what I had already done and got me nowhere. In desperation, because I also noticed there is the possibility of a £5000 fine for non registration. I went to our local HMRC in Manchester to speak with someone and sort it out but I could NOT get past the man on the  reception desk who handed me a sheet of paper saying everything I needed was on there. I read it and it was not and told him so, to which he replied we don't see anyone, when I explained about the fine he replied just ignore it and that this situation was all the Conservative Governments fault. 
Has anyone got any suggestions as to what I should do, the firm that hold the trust say they are not authorised by the financial conduct authority to provide legal or financial advice.  Also our firm of financial planners  said they cannot help, and everyone keeps sending me back to the HMRC website which just runs you round in circles.   

xylophone

we had taken out a Trust Bond in my wifes name in 2004 that upon her death our son would be the beneficiary. 

This type of Bond?

https://www.accountingweb.co.uk/any-answers/registering-trusts-holding-life-insurance-bonds

https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23030

the firm that hold the trust say they are not authorised by the financial conduct authority to provide legal or financial advice.  Also our firm of financial planners  said they cannot help, and everyone keeps sending me back to the HMRC website which just runs you round in circles.   

Who is/are the named Trustee (s)?

Does this help at all?

https://www.youtube.com/watch?v=RoROsWGjILE

LHW99

Do you mean an investment bond placed in trust?

eg https://techzone.abrdn.com/public/iht-est-plan/Taxation-of-Bonds-in-Trust

https://www.mandg.com/wealth/adviser-services/tech-matters/iht-and-estate-planning/trustees/trust-registration-service

With regard to the UTR, this should be on your tax code or other HMRC notice. If the bond is in your wife's name it may be her number that you need.

I do know that I had problems registering a bare trust for my grandchild, because I had to register "as a company", otherwise the system wouldn't work. That may not be the case here, however.

If you can give more information about the "Trust Bond"some of the knowledgable people here will be able to provide more useful comments than I can

poseidon1

Pretty sure HMRC was asking you for a UTR for the trust itself rather than any pertaining to you and your wife's personal tax affairs. Unfortunately, assuming what you have is indeed a life assurance company investment bond in trust, it would not have been standard practice for a financial adviser to recommend reporting the trust to Hmrc on inception hence no UTR. 

 This is because  whilst it remains invested or  encashments are restricted to no more than 5% of the original  investment (during its first 20 years ), it neither generates taxable income, or chargeable taxable gains. I also assume the bond is an onshore policy where the underlying income  gains are deemed taxed at the life company's 20% composite rate. The advice below does not apply to offshore policies.

You indicate this trust was created in 2004, so you may have passed the point ( or may soon do so), when it can no longer utilise the 5% ' tax free' withdrawal, so any partial or total withdrawal ( after the 20th anniversary) should now trigger something called a 'chargeable event' by reference to the policy gain attached to the withdrawal. Any potential income tax charge that might result on this 'gain' is ascertained by reference to the settlor's personal tax position and taxed on them, and herein lies a tax planning opportunity you should both consider whilst your wife is alive.

To explore this I would recommend you seek the advice of a competent accountant who is a member of the Society of Trust and Estates practitioners (STEP). Such an individual can review the terms of the trust to see if the trustees have the power to advance trust capital to the beneficiary during the settlor's lifetime ( such powers were standard).

If so, there are two courses of action open to mitigate or wholly avoid any potental income tax charges embedded within the investment bond. If your wife is a basic rate tax payer encash sufficient bond units so that any gain ( after something called 'top slicing relief  ) when added to her other income keeps her firmly within the basic rate rate tax band. The resulting cash can then be released to the beneficiary early ( ie BEFORE your wife's demise).

Alternatively, if your wife is a higher rate tax payer and destined to remain so, then the trustees can consider releasing the bond ( or parts of the bond ), direct to the beneficiary' s personal ownership. If he is a basic rate tax payer he can seek to use  top slicing relief to avoid income tax on bond gains. In both cases and depending on the size of the bond this can be structured over more than one tax year.

This of course all assumes there is no impediment preventing release of capital to your son before your wife's death.

Please note, if the trustees wait until after your wife's death before distributing the bond /cash to your son, there will be an unavoidable income tax charge on the trustees by reference to the entire bond gain in year of death with no top slicing relief available at trust level.

 You should  have already  successfully avoided IHT on the value of this trust, so it would be a shame not to take advantage of the quirks inherent in investment bond taxation to avoid/mitigate the embedded income tax exposure therein.

However,  I stress reference be made to a STEP qualified accountant ( STEP has a directory of members) for this tax planning exercise, it is not something to be undertaken by amateurs, and such an accountant should also be able to navigate and resolve the difficulties you have encountered in your dealings with HMRC thus far.

Good luck!

poseidon1

As a follow up to my previous post I attach below  an extract from HMRC's manual on the taxation of single premium insurance polices ( investment bonds ) as it pertains to top slicing relief.

https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm3820

 I do this by way of  re-emphasis that the OP should refer their investment bond trust to a STEP qualified accountant, who more likely than any other professional should possess the core competencies to consider the income tax planning opportunities inherent within the bond trust in its current state having regard to the complex tax landscape that has evolved around it. 

I also hope the post will not only assist the OP in their present predicament, but be a helpful general guide to other forum readers who possess similar investment bond trusts, originally created with IHT planning in mind but may now have latent income tax problems embedded therein of which they may be previously unaware. It has certainly  become clear on the Savings and investments forum that such bond trusts still persist amongst individuals with a very hazy understanding of their options and tax compliance responsibilities going forward.

manjac

I thank you all for your comments and advice. I am 80 and my wife is 70 unfortunately much of your advice is lost on us. I have no doubt we will sort it out eventually ,the main stumbling block seems to be the 12 digit UTR which we have, but apparently I need a ten digit and cannot seem to get one.  There is no way I will pay the £5000 pound fine for late registration as the HMRC web site is rubbish and the very fact that I have been down to the HMRC office in Manchester armed with the policies looking for advice after long fruitless telephone conversations with HMRC operatives, not that the conversations were long only the waiting time to speak to someone, plus a letter to HMRC Trust Registrations which to date has been un-answered, I was not  able to get past the Man on reception in Manchester or the two security guards on the turnstiles its just a joke. He thrust a sheet of A4 into my hand and told me everything I needed to know was on that sheet, I read it and told him it was not, to which he replied no one will see you anyway and you can blame the Tories for that.  These are the people that collect our taxes, They are unbelievably un-helpful with the power to prosecute for none compliance.   

poseidon1

manjac said:

I thank you all for your comments and advice. I am 80 and my wife is 70 unfortunately much of your advice is lost on us. I have no doubt we will sort it out eventually ,the main stumbling block seems to be the 12 digit UTR which we have, but apparently I need a ten digit and cannot seem to get one.  There is no way I will pay the £5000 pound fine for late registration as the HMRC web site is rubbish and the very fact that I have been down to the HMRC office in Manchester armed with the policies looking for advice after long fruitless telephone conversations with HMRC operatives, not that the conversations were long only the waiting time to speak to someone, plus a letter to HMRC Trust Registrations which to date has been un-answered, I was not  able to get past the Man on reception in Manchester or the two security guards on the turnstiles its just a joke. He thrust a sheet of A4 into my hand and told me everything I needed to know was on that sheet, I read it and told him it was not, to which he replied no one will see you anyway and you can blame the Tories for that.  These are the people that collect our taxes, They are unbelievably un-helpful with the power to prosecute for none compliance.   

Your DIY approach to try and resolve this complex issue was pretty much doomed to fail. Unannounced visits to HMRC offices to seek their advice makes no sense at all, particularly now that significant numbers of senior staff work from home!

My strongly worded advice to you to  seek the advice of a STEP qualified tax accountant seems to have been  ignored.

 I can only repeat that such a person is your best bet to navigate the complex mess you are in and try and patiently explain the nature of the trust product you have signed up for. 

xylophone

It does seem that you would benefit from expert advice from a qualified practitioner.

Try

https://www.step.org/directory/members