I was hoping this query had already been addressed on here but having a search I can’t find any views.
A will creates 2 trusts on death, life interest (will contain a property) and a discretionary for the residue.
These are both exempt from registration via TRS for 2 years after death.
We have now passed 2 years but the estate is ongoing and the assets have not yet been appointed to the trustees.
Are the trusts now registerable on the TRS as 2 years has passed since death?
I believe they are not, as although the have a “start” date of DOD they don’t actually “exist” yet as hold no assets.
Once the assets are appointed to the trustees then they are registerable within 90 days.
I believe that the strict legal position is that no will trust can subsist until it has been completely constituted. That can only happen once the assets destined for it have been clearly identified as not being required for administering the estate. In your case the property and the assets comprising residue respectively. It is not relevant whether the assets have been formally appointed/transferred to their respective trustees. It is a question of fact whether they are or are not needed to pay expenses debts legacies etc. Because that moment is both difficult to pinpoint and so somewhat elastic HMRC will normally accept the PRs’ decision on timing, presumably unless it is plainly questionable. TRSEM6045. HMRC seem not to apply the contents to TRS “A will trust may commence at a later date either during or at the end of the administration period”
HMRC there allude to the doctrine of relation back for a specific gift on trust but go on to qualify their view by the words quoted above. It may be that where such a gift, as is your property asset, is ultimately determined to not be required for administration, the will trust will relate back to death for some purposes e.g. entitlement to income not used for administration. But that trust does not exist meanwhile. As Nigel points out, the destined trustees of it do have a chose in action i.e. the right to compel due administration, a right in personam (but not a right in rem to the destined trust property) which can only be held by them in trust. I have not seen HMRC advance that argument anywhere, although I doubt it has yet permeated through their thick skull. If correct, failure to register within 2 years would leave the trustees open to a penalty. The liability may arise before even the executors, let alone the trustees, formally take office. See TRSM80020 for HMRC’s unilateral assumption of a dispensing power denied to the King since 1689.
There is no legal justification to relate back a gift in trust of residue as residue does not exist until it is ascertained. The chose in action here is even more ethereal as the trustees’ right in personam prior to that moment might in theory apply even though there ultimately proves to be no residue at all and the property has to be sold to pay debts. Statute may relate back for limited purposes e.g. ss 83 and 91 IHTA.
But all this mystical theology is lost on us as it would be on a thug attacking you in the street. In practice, to avoid a good hiding, you hand over your watch and wallet. Here the trustees just register any will trust before the 2 year period expires, as soon as they know they are potentially trustees and probably even if they do not. “HMRC Rule OK” per the graffito of old. We are fortunate they have no plans we know of to invade a sovereign state.
As Jack says regarding the two trusts, but since an estate isn’t a trust it doesn’t need to be registered. HMRC agree up to a point - see the example of Paula’s estate at TRSM23020. However, example 1 below that sees a trust where, as Jack has pointed out elsewhere, TSEM6035 sees no trust.
HMRC’s views of when will trusts start is also given in TRSM20230.
Despite’s the views that the “estate” does not need registering, HMRC view is they do if the will mentions executors hold as trustee, so we have been registering such estates once the 2 years has passed. As Jack said this is for an “easy” life and I am sure an executor would rather pay a modest fee for set up than find a £5K penalty coming their way. I am not saying it is right, but that is the view we take.
We do caveat this that some have differing views, indeed I have had clients take a second opinion and not register.
Onto the other trusts, I had a much more through read of TRS23020 having not appreciated it (or since last reading maybe it has been updated) and HMRC guidance is that a will trust with a specific legacy should be registered 2 years after death, but a “residue will trust” does not commence until the admin period has ended.
I also take into account the argument of Jack that neither exists until the assets are placed into the trust, which must be right.
In this case I will go to the client, explain the estate position re registering, explain no need to register the “residue trust” until admin done and explain the same can be said of the life interest trust but HMRC don’t take that view. So can register now and be “safe” or wait and run a risk of a penalty.
So 3 registrations will be done, eventually. Overkill indeed but the whole TRS is overkill.
As an aside there is also now a co-ownership trust for the property that needs registering.
For what it is worth, if I was in the position of this executor I would take the view that now 2 years has passed the will trust is going to exist so may as well register it and not run a risk of a penalty.
Again thanks for the input, I now appreciate the differences.
Fascinating Gill! Albeit welcome, and in my view accurate, it raises serious questions.
Assuming it is not (as yet) published generally, how far can anyone rely upon it? I am not able to access the Agent’s Forum and there is no use trying to confirm it on the Customers’ Forum as the replies there are worse than useless. I shall not importune you all with my usual diatribe about those of us discriminatorily denied access to the Agent’s Forum or with my excoriation of legislation by proclamation.
There is some law about what anyone can rely on and when as to general principles e.g. ex parte MFK Underwriting in 1989 (JR refused on the facts) and the Davies case in the SC in 2011 (won by HMRC). In Sippchoice (2017) HMRC was allowed to disown a statement in its Pension Manual as not being correct in law (crocodile tears shed). Not all the media by which HMRC makes its interpretations known have yet been subjected to litigation and are likely to be highly fact-specific. The utterances issuing forth from The Beast’s Hydra’s Heads are varied and myriad.
The Admin Manual is not helpful although ADML1300 is not promising in its very narrow ambit of what HMRC will do about one-to-one incorrect advice.This may be because when a taxpayer complains about his reliance being challenged, HMRC wants to handle all such assertions centrally for quality control i.e. standardised attack tropes.
Gill will be aware that this is a public forum and I assume she has implied or even express HMRC consent to post here at least. It would be hard for HMRC to disavow it any more than the categorical assurances given to professional bodies (Does the Agent’s Forum have confidentiality rules?)
I shall send one of my Henry Root letters but my Dossier at Stasi HQ is substantial and I am a “foreign agent” equivalent, Putinwise, so persona non and communications merely filed NFA. I urge you to take action yourselves generally or as to a particular client if possible.
Pragmatically the line of least resistance is still the one the outlined above and, unless done pro bono, the client is likely to be charged as much as for just registering anyway. Some of my clients would have relished the joust at any expense. Nevertheless it remains a rule of law deficit.
Gill has unhelpfully deleted her post, perhaps owing to your comments about consent. Could you please summarise what she said?
On the topic of relying on HMRC say see R (oao London Fluid System Technologies Ltd & others v HMRC [2023] EWHC 2206 (Admin)). HMRC said that ‘can’ in their press release meant ‘must’.
I have corresponded directly with Gill. She regrets posting for whatever reason and I want to respect that. I did not even know that one could delete posts on here. The LSG online regularly deletes some of mine as being disrespectful (viz. heretical and blasphemous) towards the LSG,TLS, SRA and The Establishment of Eton, Balliol, Whites and the Guards. I now copy these pre-emptively into the FSU.
You can infer from my own post that my view, that the 2 year limit does not apply to a Will trust if the AP is still on foot, may actually have penetrated into the official concrete cranium. A nod has to be as good as a disappearing wink from the impartial Civil service, at least for now. Perhaps we will soon have an ex cathedra encyclical from Castel Gondolfo on the Strand WC2R 1LB, infallible but not to be relied upon in case it is wrong or proves inconvenient.
I have downloaded but not yet read the case you mention and I look forward to enjoying more casuistry on the part of the Tax Police (unarmed). How many angels will be dancing on this new pinhead?