I am dealing with a Discretionary Trust which holds an Offshore Investment Bond. This is the only asset. On the face of it the Bond does not produce a taxable income or gain.
Whilst the position remains unchanged the only tax issue to consider is the 10 yearly IHT charge.
Do forum members agree there is no need to register these types of Trust with HMRC?
Justin Wallace
Brewer Harding & Rowe
My understanding is that you only have to register when you have a tax charge. In this situation, you will only have a tax charge at the 10 year date. They look at income tax, capital gains tax, IHT, SDLT, SDRT or land and buildings transaction tax (Scotland) - so these need to be considered as well.
Lucy Orrow
Lambert Chapman LLP
With an existing Trust that has the Bond already in place, I think it’s fair to say that it isn’t necessary to register with HMRC. However, I don’t think that will continue to apply with new Trusts or if new investments are made in an existing Trust. The reason being is that, upon application, Insurance Companies are now asking for the Tax Identifier of the Trust itself and the Trustees. Consequently, registration with HMRC becomes necessary.
Clive Barwell
Wren Sterling
Investment bonds are frequently held in a discounted gift trust (DGT), with the settlor’s carved out entitlement often being equal to the maximum permitted “tax free(!)” annual withdrawal from such bonds.
Provided that the cumulative withdrawal is not exceeded, I would not envisage the DGT needing to be registered until the IHT charge arises on the 10th anniversary. However, if there is any extra withdrawal (say, to pay school fees) which causes the cumulative limit to be exceeded, do the trustees need to register at that stage? Although the trustees hold the bond, I understand the chargeable event is taxable on the settlor, not the trustees, which would seem to exclude the trust from registration.
If this is the correct analysis for a DGT holding UK investment bonds, does it apply equally to those holding offshore bonds?
Paul Saunders
presumably the trust is only registered at the 10 year date if the value of the assets is more than 80% of the nil rate band?
Karen Holmes
Minahan Hirst & Co
An observation on Clive Barwell’s point about obtaining a TIN for the trust: I don’t believe the TRS system permits registration of the trust unless there is a liability to tax of some sort. If you can’t answer “yes” to one of those questions it won’t let you go any further.
Diana Smart
Gordons LLP
There are other situations where a TIN is required but there is no liability. We recently had to obtain one for an offshore trust making a sub-fund election. HMRC insisted a TIN was required and that it could only be obtained via the trust register but the trust had never had a UK tax liability.
Andrew Goodman
Osborne Clarke LLP
Thank you all for your helpful comments. The investment has been set up without the need to provide a TIN. I cannot therefore see a reason to register given that there are no immediate tax consequences whilst the situation remains unchanged and until the 10 year anniversary.
Justin Wallace
Brewer Harding & Rowe