TRS registration - to register or not to register that is the question

Trusts Discussion
1

I have a client who is a British subject/citizen and a tax resident in France.

I set up a Bare Gift Trust for my client with her only child, an adult son, as the sole beneficiary in April 2018. The Trust asset is a non income producing Investment Bond provided by an International Life Insurance Company. Neither are the money assets held within the Bond UK based.

In addition to being the settlor of the Trust my client is a trustee together with her niece. However her niece is a UK resident.

My client’s son is a resident of Spain and has been for some time now.

Given that my client’s co-trustee is a UK resident I am not sure as to whether she will require the Trust to be registered with the Trust Advisory Service ( TRS ) ?

If registration should be a requirement, my client wishes to know how she should go about registering. She can see no compelling reason to have to pay a third party to do the registration for herself hence she would want to effect the registration of her Trust ( if indeed the Forum deems it to be necessary, that is ! )

2

I think it is a question of reading the trust registration guidance in the light of your client’s specific circumstances. That is is of course if the Trustees want to pay you for this work. If not then I suggest she researched the point herself, especially as if your advice proves to be incorrect she will no doubt be expecting you to pay any penalty for late registration.

She and the other trustees have a duty to meet their reporting etc obligations. If she is unable to do this herself (clearly not as she is asking you for advice) she needs to pay someone. It is part of the cost of having a trust. If she doesn’t like it she can wind up the trust, although that in itself will bring costs, just not ongoing ones.

We have all seen cases where clients think they can do things themselves and, like much DIY, it just ends up in a mess, costing more to put right than it would have cost for someone to do it properly in the first place. It does not cost a lot to register a trust. I suggest she pays someone look at this point and to do the regis if needed. If she is not willing to then I fail to see why you should put yourself on the hook for, presumably, nothing by telling her whether she needs to register. Are you even insured to provide such advice (IFAs I have spoken to will not advise on this)? I would also add, if she can’t read and understand the guidance as to whether she needs to register, why does she think she can do the registration correctly?

Sorry to go on but I do hate the something for nothing brigade.

Best wishes

Sara

Sara Spencer | Trust Manager

www.trustandestate.co.uk

Sara Spencer Ltd, 8 Kingsway, Harrogate, HG1 5NQ

07952 651881 | 01423 524114

Sara.spencer@trustandestate.co.uk

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3

Your client is resident in France.

Have you taken (? as promotor?) or did she take advice on the effect of article 790-0 bis French Code général des impôts which will have required her to register the trust both in her capacity of a settlor (*constituant) ,*and (after 2013) as an administrateur (trustee) in France irrespective of the date at which she moved there. A high risk of a penalty of 20.000€ for non-compliance on the trusts settlement and 20.000€ per year for default on the trusts annual declaration will have arisen.

Registration of the trust with HMRC will be shared automatically with French administration.

The life insurance industry appears to be continuing to turn a blind eye to this issue since 2011.

The term “’administrateur “ used to translate trustee in the French tax definition of a trust means that the insurance company can be treated as a form of administrateur and is therefore potentially liable on a joint basis for the penalties and any tax due by the trustees and the beneficiaries. Please note that France has not yet ratified the Hague Convention of 1984 and have been very clear that their definition was intended to catch anything that could be compared to a trust.

There have been several exchanges and posts on the French Connections issue in the past.

Please contact me on 015345 625879 if you need assistance on this.

Peter Harris

4

You’re likely fine from the UK perspective. Para 42 of the Regulations:

(c) a trust is a “UK trust” if—

(i) all the trustees are resident in the United Kingdom; or

(ii) sub-paragraph (d) applies;

(d) this sub-paragraph applies if—

(i) at least one trustee is resident in the United Kingdom, and

(ii) the settlor was resident and domiciled in the United Kingdom at the time when—

(aa) the trust was set up, or

(bb) the settlor added funds to the trust;

1 Like
5

As I understand it, HMRC will issue a fine for non-registration of required funds of £100. It is not known yet if that £100 is a one off or yearly charge. Given the cost from some TRS’s is £300 PER trust, I know what most of my clients will opt for. Equally as long as a client can be the Lead Trustee the registration isn’t too difficult, but it is unneccarily complicated and longwinded. I’m sure the French/Spanish side of things will be even worse!

6

It may be that if your client is with the UN you feel a diplomatic exemption might apply. You might need to check that that would work in France, but not with the French tax administration, in this specific area. They tend to attempt to jump on ex-EU employees on their retirement, but the UN might have better protection.