Trust Registration Service (TRS) – Changes that take effect from 1 April 2023

As a ‘relevant person’, Zurich has been required to obtain proof of registration on all registrable trusts for any ‘new business relationship’ entered on or after 1 September 2022. This has, for example, applied when Zurich receives a new trust deed for an existing investment, or where there is a change to all trustees under any registrable trust. Zurich has also been required to report to HMRC where any material discrepancies are identified between the details it holds and the HMRC proof of registration document.

From 1 April 2023, expansion of the Money Laundering Regulations requires providers, like Zurich, to report material discrepancies that are discovered on an ongoing basis. Therefore, Zurich will need proof of registration on a wider range of transactions in order to detect and report a discrepancy. Much will depend on the type of policy or policies held in the trust, which itself must be a registrable trust.

What this means in practice for existing trusts with Zurich and its previous brands from 1 April 2023:

For an investment policy

While there are a few exclusions, we know that an investment held subject to trust will very likely need to register on the TRS. In fact, unless it is excluded or has been held in trust for less than 90 days, it should have already been registered by the trustees.

The circumstances where proof of registration is required, has been extended to include when:

• A surrender (whether partial or full) is instructed
• A claim (e.g. on death) is made, or
• A new regular withdrawal is set-up, an existing withdrawal is increased or is to be paid to a different bank account.

For a ‘pure’ protection policy (i.e. no surrender value)

Here, the trust will likely be exempt. This assumes that the trust holds only a ‘pure’ protection policy and the only benefit is a sum assured paid out on the death, terminal illness, critical illness or disablement of the life assured.

Of course, such a trust could later become registrable, for example, where:

• The death benefit is not paid to beneficiaries within two years of the date of death
• A terminal illness, critical illness or disablement claim is paid to the trustees, or
• It becomes a taxable trust (e.g. a trust periodic charge is payable).

If the trust becomes registrable, Zurich will require proof of registration in the event there is a claim on the policy.

For a protection policy which has a surrender value

The position here is more complex.

Where a partial surrender is instructed and it’s the first to be taken from the policy, the trust would then become registrable, and the trustees would have 90 days to register the trust. Once registered, proof of registration would need to be provided to Zurich before any further payments can be made.

For a full surrender, as long as there have been no previous partial surrenders, the trust will be exempt if Zurich pays directly to a beneficiary, as opposed to the trustees.

Where either a partial or full surrender is instructed and there has been a previous partial surrender, the trust should already have been registered by the trustees. Therefore, we will need to obtain proof of registration before we can make payment.

Once the trust becomes registrable, Zurich will require proof of registration in the event there is a claim on the policy.

Additional points:

• Regardless of the type of policy, a trust must always be registered if it becomes liable for tax.
• Proof of registration can be obtained by downloading the PDF output from HMRC TRS.
• If proof has already been received by Zurich, and there have been no changes to the trust since, it does not need to be provided again.
• If proof is required, but it’s not produced when requested by Zurich, a payment on the policy may be delayed.
• Failure to register or keep information up to date on time, may lead to a financial penalty being imposed by HMRC.

More information about the TRS, including how to register, can be found at the relevant gov.uk page and in HMRC’s TRS Manual.

This represents our current understanding of the relevant legislation and available guidance.