Trustee Bank Accounts becoming harder to access - UHY Ross Brooke Chartered Accountants (2024)

• February, 2024

One area that continues to be problematic for Trustees are the options available for Trustee accounts. This affects those in Practice who deal with Trusts – from those acting as Professional Trustees to those who assist Trustees with their tax compliance.

By Rebecca Horne-Smith – Senior Tax Manager

In the last few years, several banks and building societies have stopped offering banking services to Trustees, and in some cases, have actually closed existing Trustee accounts, forcing their long-standing clients to seek alternatives.

Bank or building society accounts for children, held by parents on a bare Trust/nominee basis, seem to be widely available and not so much of an issue.

However, for the more complex Trusts such as Discretionary Trusts and Interest in Possession, options for new clients are limited, with some providers requiring minimum account balances, which for some may not be achievable.

The withdrawal of services has been blamed on increased costs and regulations.

HMRC’s figures released in October 2023 show Trust numbers are dwindling. Nevertheless, there are still many Trusts in existence or being created for varying reasons, such as estate planning and protective Trusts for the vulnerable. Having a separate account for the ongoing management and protection of Trust funds is quite a basic and fundamental part of running a Trust successfully.

Creating a New Trust Bank Account

Not all institutions are exiting the market and there are still providers for whom the Trusts sector remains both viable and attractive. These banks are investing the necessary time and expertise. However, from recent experience the process of creating such an account does seem to be rather varied.

Understandably in both of my recent cases, proof of registration was a key requirement. This is proof that the Trust and all its connected parties have been declared on the Trust Registration Service (TRS) with HMRC, which is primarily designed as an administrative system and is a part of the United Kingdom’s anti-money laundering legislation.

What has varied is the evidence of such registration required. For example, one merely required the letter from HMRC with the notification of a Unique Taxpayer Reference (UTR), whereas the other would only accept the official “certificate” with HMRC’s logo at the top, which Agents can only obtain once the TRS digital handshake process has been completed.

In both cases, neither would accept the copy of the original submission to HMRC, despite this having more data about the Trust than the abbreviated certificate, and in one of our cases, there were still added questions raised over the TRS contents.

Therefore, in both scenarios, there has been a delay in the creating of the accounts, as we are often in the hands of HMRC’s processing timeframe for the UTR or URN (if a non-taxable Trust), or having to supply further information, supplementary to the TRS documents, which also adds costs to our client.

Alternatives Being Offered

To “work around” some of the complexities, some banks have offered our clients the option to switch to a standard bank account, held jointly between the individual Trustees. Whilst in essence, this doesn’t perhaps create any immediate issues, as the result is ultimately the same (i.e. Trust funds are being held separately and the account can operate as it was before to receive and make payments), this option does raise a few concerns:

1. Who are the beneficial owners – one of the reasons for Trusts to be under such scrutiny is due to the fact the legal owners and beneficial owners of the funds are not necessarily the same. This has led to stringent anti-money laundering rules, hence the Trust Registration Service (TRS) and could be partly to blame for increased regulation within the banking sector. Bypassing this process to create an account that seemingly looks to be owned outright by the Trustees is counterproductive to the efforts to make Trusts more opaque.
2. Fund Protection – Trustees would need to ensure that any account created in this manner has the security of secondary authorisation of payments, thus protecting funds from fraudulent withdrawal without the other Trustee’s authority.
3. Data sharing with HMRC – for individuals who have accounts that are interest bearing, the annual income received is reported directly to HMRC. If the account is owned jointly between the Trustees, and they do not report this income personally, this could lead to investigation by HMRC later on – more so now interest rates have increased. Certainly, we have found similar instances where HMRC have been provided information from Land Registry over property disposals by Trustees. HMRC have sent nudge letters to each Trustee individually, despite the disposal and capital gains tax being reported and paid on the Trust tax return and/or the UK Property Return within 60-days of completion. Although only a simple explanation is required, it’s still an unwanted side effect which could cause stress and result in extra professional fees.

Whilst Trusts are still very suitable and necessary vehicles to some, the added red-tape to complete what seems like a simple task of opening a bank account can leave clients and their Agents frustrated and as previously mentioned there could be some knock-on effects later on down the line. It’s unlikely things will change materially in the short term but perhaps in time, with more understanding and use or acceptance of HMRC’s Trust Registration Service (TRS) information, things will become a little more uniformed and streamlined for us and our clients. We hope!

If you are struggling with your duties as a Trustee, or are a solicitor or other legal professional in search of tax advice for Trusts, please do get in touch with us.

Newbury: 01635 555666
Abingdon: 01235 251252
Swindon: 01793 610008
Hungerford: 01488 682546