I’ve been reading through various threads with interest looking for an answer to a situation I find myself in.
A Will Trust (created in Husband’s Will) I have been assigned to liquidate on behalf of a solicitor (I’m an Investment Manager) that has not been registered on the TRS (trust in existence 2+ years) has instead been collating all taxable income etc under the life interest’s (Wife) personal tax code. Now the life interest has died, and we have been approached to open an account, our tax division have advised the Solicitor that the trust does in fact need registering on the TRS prior to opening account with us but the Solicitor disagrees.
As I’m in limbo I wondered if anyone can clarify the true reality of what is needed please? Can one legally A. continue to use the now deceased TIN/UTR? B. do actually register the trust with TRS then close the record? or C. there is actually an exemption in place where registration is not needed and we can proceed without a UTR?
I am inclined to believe the answer is B but I am hardly qualified to be the arbiter of this situation and would greatly appreciate any help offered to break the status quo.
I presume that you are a relevant person required to perform customer due diligence under SI 2017/692, Regs 27 and 28. Reg 31 provides that if you are unable to carry out CDD on a customer you must not form, or must terminate any existing, business relationship.
The starting point is to decide who is your customer. Is it the solicitors or are they acting for the trust and so are intermediaries within Reg 28(10)? As they will be TCSPs you might in theory be able to rely on their CDD but perhaps not given their TRS attitude. A trust (not itself a defined term in the Regs save by reference to what it is not) can never be your customer as it lacks legal personality. Your customer will be one or more of its “beneficial owners”. I will use “trust” below with that caveat
Regs 44,45 and 45ZA impose obligations on trustees in connection with the TRS. Reg 44(2) requires trustees to provide a Reg 27 person doing CDD with certain information. This does not include whether it is registered on TRS, or should be but is not. These obligations, and any penalties etc, are imposed on the trustees not the other party. You are not obliged to seek this information but you might wisely consider it part of your CDD.You should comply with any industry or professional guidance. JMSLG 5.3.258 makes no reference to TRS. LSAG for lawyers section 6 only refers to it where a solicitor is acting as trustee as to their own obligations as such.
My tentative conclusion is that provided you have done the CDD which is clearly demanded of you (including making a request under Reg 44(2)) then you are free to act for an agent of a trust or the trust itself even if the trust should apparently be registered but is not. This, subject to discrimination law, is a matter for your judgment. In that situation I would bear in mind that whether a trust needs to register can be contentious, that some will decide not to on reasonable grounds, some will decide not to on specious grounds (regrettably I would include costs), and others will just flout the law, ignorance of which is no excuse with a solicitor on board. Failure to register imposes a civil penalty but not on you. In theory it could constitutute a criminal offence by the trustees but I doubt that entails a threat to you. You have a heads up from your tax division and so it is very much down to your corporate policy and its concern for reputational damage.
It seems that the trust was registrable, even if about to end. The solicitor will have to look to himself or herself as to their own exposure from not ensuring registration by their client but continuing to act e.g. the Solicitors Persecution Authority. They will be a “relevant person” but there seems no legal obligation on them either to make a Reg 44(2) request, although the application of the Nelson touch may not endear them to their Regulator.
Fortunately I no longer encounter this dilemma but I would be surprised I would have acted for the kind of client who, being advised that registration was required, instructed me that it was to be ignored. It sounds an alarm that the client may suffer from poor fiscal hygiene which bodes ill for unpredictable collateral damage. The same goes, more painfully, for an existing client. My clients mostly revelled in tax avoidance but deliberately ignoring a clear regulatory statutory obligation. monitored by HMRC, would have crossed the line for me.