Thousands of individuals throughout the UK who have purchased shares or investments in their name but for the benefit of another person need to register as a trust by 1st September or face penalties that could amount to up to £5,000 per offence, say leading tax and advisory firm, Blick Rothenberg.
Chris Gillman, a director at the firm said: ‘These rules were introduced several years ago but have recently been expanded to catch much more mundane and common situations. A particularly frustrating issue is that the new rules can apply to parents owning investments for their minor children.’
‘The problem is that thousands of parents throughout the UK probably have no idea they have to register by 1st September. It does not just share which are caught – the rules cover most investments, including real estate/property. Failing to register could cost up to £5,000, whereas the HMRC judge the failure to be caused by deliberate behaviour, although initially, the late registration triggers an immediate fine of £100.’
Chris added: ‘HMRC’s register of Trusts, which came into play in 2017, was a controversial but perhaps understandable additional level of compliance required for trusts with exposure to UK taxes.’
‘The recent extension of this register to capture all UK trusts, together with several non-UK trusts, has, by some estimates, increased by 1000% the number of trusts required to register and, despite the representations of several professional bodies, caught several scenarios that the legislation was surely not designed to catch.’
‘HMRC has also done little to publicise this extension outside of industry professionals and therefore faces the possibility of mass non-compliance.’
Chris expanded: ‘On the face of it, extending the register to all express trusts (subject to some exemptions) is a logical step which brings registration of all trusts into one place and takes away any doubt: if you have a trust, you must register. An express trust is any trust created intentionally, with or without deed.’
‘This means that all bare trusts and many nominees’ arrangements are caught. Nominee arrangements are quite common, for example, a parent holding shares or a property interest on behalf of a minor child. Thankfully, a parent holding a bank account for a child has been excluded, and, following a change of heart by HMRC, so are Junior ISAs.’
While it could be argued that capturing these arrangements gives HMRC useful information, allowing them to ensure that taxes are being paid by the right people and maybe even allowing them to see patterns in respect of this sort of arrangement, HMRC does not require details to be provided in respect of the assets held for nominee arrangements. The only information HMRC will have is that the arrangement exists: person X holds something for person Y. It is hard to see what HMRC could usefully do with this data.
He added: ‘When the implications of exactly what all of this means is considered, and the details of what needs to be registered are understood, one might rightly begin to question what this significant amount of extra administration achieves.’
‘The deadline for all of this is 1st September 2022, with initial penalties of £100 issuable for late filing. It should be noted that HMRC has yet to issue penalties regarding the original trust register filing requirements, but this is not a position to be relied on going forward.’
Chris concluded: ‘While many professional advisors will have reached out to their clients to make them aware unless HMRC has a late change of heart, we would advise everyone to consider their position and act now if necessary.’