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Do I have to use my estate agent’s chosen mortgage broker?

Do I have to use an estate agent’s preferred mortgage broker to make an offer? I’m a first-time buyer and my estate agent has pushed me to use their mortgage broker to make an offer on a house. I’m not happy with their service but concerned my offer will be withdrawn if I don’t use them — what should I do?

Jayna Patel, associate at Wilsons solicitors, says absolutely not. This practice is known as conditional selling and it is against the law in the UK.

Estate agents are prohibited from aggressive practices. This includes pressuring, intimidating and pushing potential buyers into using a preferred mortgage broker. 

Headshot of Jayna Patel, associate at Wilsons solicitors
Jayna Patel, associate at Wilsons solicitors

It is against the law for estate agents to hide material information from sellers. This includes making the seller aware of all offers unless the seller has expressly requested them not to. Additionally, an estate agent should not misrepresent or delay communicating offers to the seller.

Estate agents should also confirm to the buyer that the offer and stipulated conditions have been submitted to the seller. Even if an offer has been accepted and the property has been taken off the market, an estate agent remains obliged to inform the seller of any offers up until the point of exchange of contracts, unless they have instructions otherwise. 

Once an offer has been made, only you can withdraw it. If you are not happy with the mortgage broker’s service, you should follow their complaints procedure. If you have opted to use the agent’s preferred mortgage broker and later change your mind; the same rules mentioned above apply. However, you should be aware that complaining or changing your mortgage broker might cause delay and this might jeopardise the sale. 

It’s acceptable for the estate agent to ask you how you will finance the purchase. It is part of their job to find out the source and availability of funds to buy the property. You should therefore expect inquiries to be made to this effect and for that information to be passed to the seller

Also, remember that you can approach the seller directly — there are no legal restrictions preventing you from doing this. But it is worth noting that if the seller has already signed an agreement with an estate agent before you make an offer, the seller might be liable to pay the agent’s fees.

Do we still have to register our wound-up trust?

My wife and I set up a trust when our three grandchildren were born to help provide for their futures and remove some money from our taxable estates. My daughter and her husband were named as trustees. It was agreed that the funds held in trust would be transferred to our grandchildren in two instalments, the first when they turned 18, and the second when they get married or at the age of 30, whichever comes first.

However, during the pandemic we decided to transfer the total funds to our grandchildren immediately and wind up the trust. We understand we may have to register the trust with HM Revenue & Customs’ Trust Registration Service (TRS) — even though it no longer exists. Is this the case and how do we go about doing this?

Richard Jameson, private wealth partner at Saffery Champness, says the TRS was first introduced in 2017 as a way to ensure that trusts and their trustees are complying fully with the relevant regulations and disclosing all the necessary tax information to HMRC. For the 2016-17 tax year onwards, all trusts with an income tax, capital gains tax, inheritance tax, stamp duty land tax or stamp duty reserve tax liability were required to register by January 31 following the tax year in which the liability arose. Any trust with such a tax liability in 2016-17 therefore had to be registered by January 31 2018.

Headshot of Richard Jameson, private wealth partner at Saffery Champness
Richard Jameson, private wealth partner at Saffery Champness

Whether or not you will have to register may depend on what assets were held in trust. It is possible that the trust’s assets may not have crystallised a tax liability — for example, if money was invested using an offshore bond thereby generating no taxable income or gains. Due to a feature of HMRC’s TRS portal, it was not previously possible to register trusts without a tax liability, and as a result these non-taxable trusts were not initially required to register. HMRC changed this last September, and announced that all UK trusts (subject to certain exemptions, including for pension and charitable trusts, which sound like they would not apply in your case) need to register by September 1 2022, giving trustees 12 months to fulfil their obligations.

If your daughter and her husband, the trustees, instructed a professional adviser to prepare the trust’s tax returns, it is worth double checking whether the trust has already been registered. All trust tax returns from 2016-17 onwards include a box that must be ticked to confirm that the TRS is up to date. 

If the trust has not been registered previously, you are correct that the trust may still need to be registered. Assuming the trust was non-taxable and that it was still in existence on October 6 2020, it will need to be registered on the TRS. 

To do this, one of the trustees will need to set up a government gateway account. Registration for the TRS is then done via HMRC’s website portal. The trustee will be required to provide information regarding the trust itself, the settlor, trustees and beneficiaries. While the process is designed to be as straightforward as possible, there can still be complications in submitting all the requisite information, so if in doubt, speak to a professional adviser.

The TRS will then need to be updated to confirm the trust has now been terminated.

If the trust has previously paid tax, but has not been registered, then HMRC will in theory charge a £100 late registration penalty, although we understand they are adopting a “soft landing” approach to penalties. 

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

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