A question has been raised with me in relation to who the Settlor is when completing the registration where the trust has arisen as a result of a DOV. As we know for IHT and CGT purposes it is the deceased but it has been put to me that for TRS, it is the beneficiary who has redirected his interest.I should be glad to have members comments.
Where a trust has been created by a Deed of Variation, according to The Association of Taxation Technicians and CIOT (albeit in 2018), each person who took less under the deed than they would have done under the will is a settlor of the amount given up and should be disclosed on the register as a settlor.
Where property which would have been settled in trust on the death of the deceased is now comprised in this settlement the deceased should also be included on the register as a settlor.
That is very helpful Francesca but itâs a pity that guidance like this is not provided by HMRC. I donât recall seeing anything about this from STEP but maybe I missed it. I suppose if one looks at it logically and with money laundering in mind, HMRC are only interested in living settlors.
If you take a look at âTSEM1815 - Introduction to trusts: supplementary deeds deed of variation or family arrangementâ it states:
" The settlor of a trust created by a deed is not the deceased, unless itâs a disclaimer ([TSEM1840].
It is the person who was entitled to the gift that has now gone into trust. The gift can be capital or income or both. The case of Marshall v Kerr (67 TC 56) is relevant. There may be more than one settlor."
The information also appears on the ATT website. As I have commented previously, it is inequitable for tax information to be made available to the so-called privileged few, namely, the professional organisations [eg CIOT; ATT etc] without it at the same time being made available to the general public.
I have this scenario too and am trying to register the trust now, it seems you can only enter the details of one Settlor - I have entered the details of the deceased as a Settlor but still need to add the details of the four beneficiaries who varied their interests. Would you add them under the âother individualâ category? Has anyone been through the registration process for a Trust like this that could possibly point me in the right direction?
The âsettlorâ of a trust is made a âbeneficial ownerâ in Reg 6. It is not defined there or in Reg 3 (General Interpretation) or in Part 5 (obligations and registration relating to trusts). Arguably though an English word it is not ordinary but used in its technical meaning. That must mean its accepted meaning in the law of trusts. There can be no justification for giving its commonly accepted tax meaning to include persons who directly or indirectly provide funds or make reciprocal settlements because these are creatures of particular tax statutes. The singular will normally include the plural but the SI makes no special provision for multiple settlors.
So the term does not embrace some kind of person HMRC like to treat as a settlor for tax purposes who would not be treated as such for the law of trusts. If they wanted that why did they not include an extended definition in the SI as tax statutes do? The line of least resistance is, though they may be making it all up, to do whatever they say if they can actually condescend to tell you.
Their only public utterance is in TRSM 32040:âThere is usually only one settlor of a trust, but there can be more than one in certain situationsâ. Yes, if trust law says so.
It goes on:" Settlors of trusts established by Deeds of Variation
Where a trust has been established by a Deed of Variation or family arrangement varying a will, each person who took less under the deed than they would have done under the will is a settlor of the amount given up.
If property which would have been settled in trust on the death of the deceased is now comprised in this settlement, then the deceased is also a settlor of this amount."
In the first example Valerie probably is a settlor because there is no trust in Jeremyâs Will, so she must have set it up either in the DoV itself or separately; but not because âshe has given up an entitlement to 50% of the estate under the willâ. In the second example it must be open to question whether Marianne is a trust law settlor of Annemiekâs will trust simply by adding funds to it. A will trust is unlikely to reserve powers to the settlor but this is often the case in an inter vivos trust. A person who adds funds to such a trust surely could not claim to exercise a power reserved to the settlor e.g. a power to appoint a new trustee. Of course âthe Settlorâ will usually be identified as such by being a party who is given that label and the power can be reserved to anyone else. If the settlor is not identified in that way I would expect the Court to identify as the settlor the person who signed the document and provided the initial trust fund as the settlor. Unless perhaps the addition was an integral part of the arrangement as it is in some naughty jurisdictions where it is sought to disguise the real settlorâs identity by using a nominee as settlor on the face of the document.
Interesting. I followed the advice given in TRSM32040 and attempted to assist a client registering a trust established by him though a variation of his fatherâs will.
I suspect there is a problem with the input for the TRS because initially I directed him along the route of a trust established by fatherâs death. That would not let us add the client as a settlor. We backtracked and took the option that the trust was not created as a result of the fatherâs death. That let us add both father & son as settlors, but now records father as alive wonât allow us to amend that.
Weâre considering having son go in and terminate the trust and set up another with just father as settlor. Iâll let you know what happens.
Reading through the TRSM32040 again, I realise I was mistaken.
âIf property which would have been settled in trust on the death of the deceased is now comprised in this settlement, then the deceased is also a settlor of this amount.â
There is nothing in the new settlement settled by a trust in the will. So the deceased is NOT a settlor in my case. Now I need to work out how to amend the register and remove father from the register as a settlor.
David, I donât think the online system allowed a removal of a settlor.
I believe you have to write to HMRC trust section to ask them to change it for you.
Only a ârelevant personâ can report a âdiscrepancyâ. Surprisingly there is no formal procedure for correcting a mistake on the register which can be followed by anyone else with a sufficient interest.
Appreciate this is an older topic on here but I cannot find guidance on the position where there is a trust within the Will but the terms of the trust are varied (in this case to extend the trust for one year) - would this still be exempt if trust wound up within 2yrs of DOD as the trust itself did arise from the Will? Or would HMRC still take the view that the trust (in its extended form) arose by DOV and therefore would require registration after 90 days?