Released 12 July 2021
The Chartered Institute of Taxation (CIOT) has flagged up clarification from HMRC regarding Trust Registration Service (TRS) exclusion for certain insurance policies with a surrender value.
The TRS will shortly be expanded to accept registrations of certain non-taxable trusts. While the basic rule is that all UK express trusts (taxable and non-taxable) should be on the register, Sch. 3A to the enabling regulations (SI 2020/991), sets out a number of exclusions for certain non-taxable trusts. These include:
•para. 4 (trusts of certain life insurance policies); and
•para. 8 (trusts holding the proceeds of a policy under para. 4 during the two years after the death of life assured).
The CIOT has flagged up the following announcement from HMRC on 12 July, which may be of assistance to those preparing for the new regime.
HMRC have confirmed that “the exclusion in Sch3A(4) can be properly interpreted as including trusts holding policies which have surrender values, and that those trusts would remain excluded until such time as the policy is actually surrendered. It follows from this that pay-outs received from such policies on death would continue to benefit from the exclusion at Sch3A(8). HMRC will include this position in the next iteration of the Trust Registration Service (TRS) manual".
The Institute comments that as it was previously understood that HMRC would only accept as excluded, trusts holding policies which did not have surrender values, this clarification is very helpful.
Commentary on duty to provide information for anti-money laundering purposes using the TRS can be found in Croner-i’s In-Depth at ¶180-585.