I am dealing with an estate that is not a complex estate for the purposes of TRSM27010 (below £2.5m, IncomeTax/CGT below £10,000 and assets sold in 1 year less than £500,000). However, the Will creates an Express Trust and the estate administration has lasted for over 3 years. Does this still require registration with the TRS?
There is some interest/dividends and shares sold which can be declared via informal route and letter to HMRC.
I have been reviewing the TRS Manual for an answer but there doesn’t seem to be a clear answer.
The short and pragmatic answer is that HMRC seem to take the view that a Will trust which is not taxable is registrable after 2 years, regardless of whether or not the administration of the estate is still on foot. Not only is this hopelessly wrong in law but ignores their own practice in TSEM6045 which states the law with perfect clarity.
This is much to the point in your case. Despite the informal arrangements for income tax you cannot absolutely rely on them as regards TRS. Despite them your trust is taxable and the 2 year time limit does not apply to such trusts anyway. The penalties for non-compliance with TRS are so severe (subject to HMRC’s grace and favour) that any cost of compliance, however technically unnecessary it arguably is, and of running those arguments if the admin period has not ended, is outweighed by the risk. If it has already ended there is no argument. Is it even worth the cost of trying to get clarification from these people or an unlikely dispensation when either is not even guaranteed?
I too agree that the estate should be registered with the TRS just to be on the safe side on this matter.
However, if there is no Will Trust but the estate administration bypassed 2 years would it still need to be registered with the TRS even if it is not a Complex estate?
The TRS is about express trusts. If the Will contains no trust there is nothing to register. See TRSM27030. HMRC see estates as a separate registration requirement. The Interesting Thing is that the Regulations say nothing about estates and so apparently HMRC are acting outside their authority in using TRS to register an estate, complex or not…
But, hey, this is the UK in 2024 so nobody cares apart from me! Though I have not asked Peter Hitchens.
So from your comments, can I assume then that an estate can be registered as both a complex estate with HMRC as well as a Will Trust with the TRS if the two are treated as separate by HMRC?
It’s funny that there is no clear answer from HMRC about this eventuality.
My understanding is the registration of the estate as a complex one is purely so HMRC can issue the UTR - it just happens to be done through the TRS.
In your situation if the will provides legacy or residue to to be held on an will trust and the will itself creates a trust of the administration (will appoint executors and trustees and estate is held on trust for the beneficiaries be them individuals or trustees) there are two registration issues on the expiry of the two year period - The trust of the administration and the Trust created under the will. TRSM23020.
If the estate were also complex and ran over 2 years three are potentially 3 registrations needed.
Thank you both for your comments. I have also received clarification from HMRC that the same estate can be registered multiple times.
If there is a Will trust and estate admin has exceeded 2 years and it is a complex estate then it will have to be registered twice - once as a Complex Estate and once as a non-taxable Trust.
On the other hand, simple estates that exceed 2 years will just be registered as Will trust.