Skip to main content

Thousands of individuals throughout the UK could be facing significant fines from HMRC due to little known tax deadline

Parents owning investments for their children are among those that will be hit

Thousands of individuals throughout the UK who have purchased shares or investments in their own name, but for the benefit of another person, need to register as a trust by September 1st or face penalties that could amount to up to £5,000 per offence.

Chris Gillman, a director at Blick Rothenberg, 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 children. The problem is that thousands of parents throughout the UK probably have no idea that they must register by 1 September, and it’s not just shares which are caught – the rules cover most investments including real estate/property. Failing to register could cost up to £5,000 where HMRC judge the failure to be caused by deliberate behaviour, although initially the late registration triggers an immediate fine of £100.

“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 a number of non-UK trusts has increased the number of trusts required to register by 1000% and, despite the representations of a number of professional bodies, caught a number of scenarios that the legislation was not designed to catch.

“HMRC has also done very little to publicise this extension outside of industry professionals and therefore faces the very real possibility of mass non-compliance.
“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 a deed. This means that all bare trusts are caught, as well as many nominee arrangements. Nominee arrangements are quite common, for example, a parent holding shares or a property interest on behalf of a minor. 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 do not require details to be provided in respect of the assets held for nominee arrangements. As such, 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.

“When the implications of exactly what all of this means are 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 actually achieves.

“The deadline for this is 1 September 2022 with initial penalties of £100 issuable in respect of late filing. It should perhaps be noted that HMRC have yet to issue penalties in respect of the original trust register filing requirements, but this is not a position to be relied on going forward.

“While many professional advisors will have reached out to their clients to make them aware, unless HMRC have a late change of heart we would advise everyone to consider their personal position and act now if necessary.”

Would you like to know more?

If you would like further information on this topic including how we can help you prepare for these changes, please contact Chris Gillman using the details on this page.

Visit our Mini Autumn Budget hub for expert commentary and analysisRead more
+