Trusts holding onshore investment bonds must comply with HMRC’s Trust Registration Service requirements. Mark Lambert, Head of Onshore Bond Distribution at Chesnara Life (UK) Ltd, outlines the key registration rules and responsibilities for trustees and advisers.
One of the key benefits of holding onshore investment bonds in trusts is that it delivers simple administration with no tax returns or reporting.
But there is one major obligation in terms of registration that all bondholders putting onshore investment bonds in trust must be aware of – The Trust Registration Service (TRS).
It is an online register managed by HMRC which contains all the details that trustees must provide about the trust including the name of the settlor, the trustees, and the beneficiaries.
Set up in 2017 it initially only required trustees to register if the trust was liable to pay UK tax including CGT, IHT or income tax. However, in 2020 trust registration was extended to all Express Trusts which are trusts deliberately created by an individual during their lifetime and includes Discounted Gift Trusts, Loan Trusts, Gift Trusts, and all trusts holding an investment bond whether they are discretionary or bare trusts.
Deadlines for registration of trusts were introduced in September 2022 and while there are no charges for registration there is the potential risk of a £5,000 fine for failing to register a trust.
All trusts that were in existence on or after 6th October 2020 must have been registered by now and any new trust must register with 90 days of being set up.
Trust Registration Service requirements
The information needed to register a trust is relatively straightforward and includes the name of the trust and the date it was created. TRS requires information on the settlor such as their name, date of birth and nationality.
A lead trustee must be nominated, and they are required to provide more detailed information than other trustees. They must provide additional personal details, including their National Insurance number and email address.
The lead trustee acts as the main point of contact for HMRC throughout the trust’s lifetime. For additional trustees, the information is very similar but they are not required to give their national insurance number and email address. Beneficiaries will have to be registered as either individuals or as a class of beneficiaries.
Discretionary trusts that have beneficiaries that are known to the settlor must be recorded in the same way as the beneficiaries of an absolute trust.
They must be recorded as Individuals and their date of birth, nationality and residency will be required. If consideration is being given to future beneficiaries, then this will need to be captured as a class of beneficiaries such as, for instance, children, grandchildren or any remote issuer of the settlor.
The TRS will also need to know whether the settlor, individual trustees and named beneficiaries have mental capacity at the time of registration.
Trustees will need to register for an organisation Government Gateway user ID and password and on completion of registration they can print or download a digitally signed PDF letter from HMRC confirming the trust has been registered. They will also receive a Unique Reference Number (URN).
Trustees must ensure registration is kept up to date and any changes such as appointing a new trustee, or an existing trustee retiring, must be notified via the Trust Registration Service within 90 days. Failure to do so can also mean a fine is imposed.
Onshore investment bond providers will generally require proof of registration to be included with the bond application form, deed, and additional information form.
Applications will usually not be processed until those are received. Evidence of registration for any existing trusts is also necessary and trustees need to ensure they have registered by the deadlines.
The role of trustees and advisers
Trustees have the legal responsibility for registering the trust via the TRS and will be liable for any penalty that HMRC imposes.
As detailed earlier, trustees will choose a lead trustee to complete the trust registration process and be HMRC’s main point of contact.
Choosing trustees for an investment bond in trust usually means turning to family members, trusted friends or in some cases professionals. It is important to note that they will have legal ownership of the bond and responsibility to manage it according to the trust deed and in the best interest of beneficiaries.
They sign all application forms, withdrawals and assignment deeds. They will handle chargeable events and assign bond segments to beneficiaries when money is paid out.
Overall, trustees have a myriad of responsibilities from making careful, and informed decisions whilst ensuring diversification of assets to secure an investment balance between risk and reward. As a result, accessing financial advice should be high on their priorities.
The settlor can act as a trustee alongside others such as family and friends. It is possible to employ professional trustees for a fee. Generally, trusts should have at least two trustees and they should include people who are likely to outlive or stay healthy longer than the settlor to minimise the need for future replacements.
Under the expansion of the Money laundering Directive in May 2023, business relationship requirements were widened to include financial advisers and their firms.
Business relationship rules require all parties to obtain the same information on the trust and its component parties. They are also responsible for raising any material discrepancies with the trust and if this is not satisfied then escalating it to HMRC.
Understanding the benefits for clients of holding onshore investment bonds in trust is increasingly important for advisers and paraplanners. Working with clients and trustees to support them on registration with the TRS can help in that process.
Advisers and paraplanners can click this link to find out more about how to engage with and work with Chesnara Life, as well as obtain a copy of its Trust Registration Service guide.
About Chesnara Life (UK) Ltd
Chesnara Life (UK) Ltd, formerly HSBC Life (UK) Limited, is a UK subsidiary of Chesnara plc. Chesnara Life offers its open architecture Onshore Investment Bond as a stand-alone offering or through a range of third-party investment platform partners. The Chesnara Life Business Development Team supports all versions of our Bond. The Chesnara Life Onshore Investment Bond provides individual investors with access to over 4,800 funds (Investment Trusts, Open Ended Investment Companies, Unit Trusts, and Exchange Traded Funds) from more than 200 Fund Managers. chesnaralife.co.uk
Chesnara Life (UK) Ltd is authorised by the Prudential Regulation Authority (“PRA”) and regulated by the Financial Conduct Authority (“FCA) and the Prudential Regulation Authority (“PRA”). Our Financial Services Register number is 133435 and our registered office is at: 2nd floor, 33-34 Winckley Square, Preston, Lancashire, PR1 3JJ, United Kingdom. Registered in England number 88695.
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