I have been asked my opinion relating to the TRS and the position regarding Junior ISAs.
As there is no general exclusion for bare trusts, I have looked the list of exclusions and Child Trust Funds are mentioned, but Junior ISAs are not. Looking at the more general exclusions, people investing in deposit accounts for under 18s are exempt, however given the potential investment term, many parents and grandparents will invest in other assets besides cash.
I would have expected JISAs to be exempt from registration but they can be a form of bare trust and are not specifically mentioned as being exempt. Does anyone have any more information or opinion regarding the treatment of JISAs?
I suspect that JISAs are exempt from registration because, although they have much in common with bare trusts, they are not constituted as an express trust.
Thanks Gerry, that would be my thought and I can’t imagine that JISAs should be registered however they are notable by their absence from the list of exemptions. An express trust is one deliberately created and contributions to a JISA are very much deliberate, whereas a CTF was funded by the Government [albeit initially] and therefore not deliberate. This makes me cautious and hence the question.
If they are not classed as an express trust then they are not included in the definition of a relevant trust under TSRM25020 unless inheritance tax applies.
I don’t follow what inheritance tax has to do with whether a trust is express
HMRC have previously indicated that JISA’s are, in their opinion, within scope of the TRS. The TRS professional bodies sub-group asked for an extension to the exemptions to cover shares or ISA’s but this was declined. Whether they are right or wrong on this is a different conversation for a different thread…
(don’t shoot the messenger)
Stevens & Bolton LLP
TRSM25020 highlights relevant trusts that pay UK taxes need registering. This could be income tax, capital gains tax, inheritance tax, stamp duty land tax, land and buildings transaction tax, land transaction tax and stamp duty reserve tax. The only one that could apply to a JISA is inheritance tax, although this may have been overtaken by the comment below.
Thanks Duncan. Interesting, as I could not find anything referring to this but obviously has been raised. Is the opinion from HMRC available anywhere?
I am not involved on any of the groups but have heard feedback from others that are. The only thing I can see currently written in the HMRC manual over this is their comment under bank accounts for minors exclusions that states (again, in their opinion) “This exclusion only extends to trusts created when opening cash deposit accounts: investments (for example stocks and shares) held on trust for the benefit of a minor child will not qualify for this exclusion.”
See TRSM23160 - Trust Registration Service Manual - HMRC internal manual - GOV.UK for detail.
Stevens & Bolton LLP
TRSM25020 is about relevant “taxable” trusts. A trust is only liable to register by virtue of IHT “if, for any given year, the trustees are liable to pay any of the following taxes” viz IHT. Seemingly we are now to be taxed or untaxed by “feedback” from “groups”.
Said “group” is the Capital Taxes Liaison Group TRS sub-committee. Capital Taxes Liaison Group - GOV.UK
Stevens & Bolton LLP
Within the exclusions for “registerable express trust” there does not appear to be a general exclusion for investments held on behalf of minors. As Duncan has stated TRSM23160 only excludes trusts created when opening cash deposit accounts.
I think you need to look at the structure of the JISA - is it held in the name of the child? or is it held by the parent/grandparent as nominee - if held as nominee then this is a bare trust and the exemption under TRSM23160 won’t apply. So, I think would need to be registered.
JISAs are classified as savings accounts by HMRC, (Junior Individual Savings Accounts (ISA) - GOV.UK) held in the name of the child. The parent is just a registered point of contact until the child reaches the age of 16. They can be held as cash, or stocks and shares.
If you look at the example HMRC give in TRSM23160:
“Dominic opens a child savings account with the Anytown Building Society in the name of his infant daughter Mia. Dominic intends to pay funds into the account by regular standing order for Mia’s benefit as she grows older.
Though Dominic is technically holding the bank account on bare trust for Mia’s benefit until Mia is old enough to take full ownership of the account, this trust does not need to be registered on TRS.”
So that would lead me to believe JISAs are exempt from the TRS.
TRSM23160 also states “This exclusion only extends to trusts created when opening cash deposit accounts: investments (for example stocks and shares) held on trust for the benefit of a minor child will not qualify for this exclusion.”
Given the investment term for many children the underlying investment is likely to be in other assets besides cash.
Capital Taxes Liaison Group is “A forum for HMRC and representatives of tax advisers and the accountancy profession, law societies, HM Treasury and others to discuss Capital Gains Tax, Inheritance Tax and trusts”.# It is not constitutionally appropriate for HMRC to publish key interpretations of the law only to selective groups, when HMRC has innumerable means to publish such views to all who might be interested and regularly does so when it suits them. Perhaps one day a taxpayer will act detrimentally in ignorance of an HMRC semi-secret view and, finding that out from an adviser in the know, doubtless not acting pro bono, will successfully assert a legitimate expectation that HMRC should not have acted so unreasonably.
Lay trustees are exposed to TRS enforcement, particularly now non-taxable trusts registrable, and may not be represented by worthies who are members of private groups. If a JISA is registrable this should be readily ascertainable by reference to public information supplied by HMRC.
I couldn’t agree more. The problem is getting HMRC to publish clear and concise information and disseminate it to the public. The “worthies” are trying their best, but HMRC are taking very little notice.
This very topic is a clear example of this problem. After reading their published manual and exclusions we have different interpretations on whether a JISA needs to be registered or not, which in turn may or may not depend on whether it is a “cash” JISA or one invested in stocks and shares.
HMRC’s main public facing website for the TRS even states at present that those who are uncertain should “check with a solicitor, accountant, financial advisor or other professional advisor if you’re unsure whether a product or arrangement is a trust and should be registered.”
One would hope that the published materials will improve over time, but this is of little help to those who are looking at the current material and scratching their heads over what to do.
Stevens & Bolton LLP
To be honest Jack, neither does HMRC …
When VAT was introduced admin and enforcement was entrusted to Customs, pre-merger. They approached it, given their history, as if all traders were criminals, just not yet convicted. I suspect the enforcers of AML in HMRC have a similar mindset.
There is a sinister undertone with much of modern tax law and HMRC’s approach to it. As exemplified by Duncan’s quote from the TRS website. It involves cost shifting. The risk is firmly shifted by the law itself to the citizen. As everyone is assumed to know the law, and ignorance is no excuse, the cost of assessing that risk is also shifted in the same direction by HMRC whenever possible. HMRC only dip into their own budget to reduce the risk, by proclamation, when they perceive that as being likely to cost them less in the long run. Reputational damage seems not to concern them. They see the issue of whether JISAs are TRS registrable as an SEP (someone else’s problem) i.e. for those nasty trustees and irritating taxpayer people.
Thank goodness for Jack Harper and others exposing the massive amount of uncertainty over the new TRS requirements. I am a lay trustee for two staight forward registered trusts, but I also have four share investment accounts held for grandchildren and several Index-Linked National Savings certificates held in trust. The issuers of these products have told me that I do not need to register them with the TRS (or are unaware of the need), but some people on this thread seem to think that I am required to register. There must be hundreds of thousands of people like me in the same position of uncertainty (or more likely completely unaware of the TRS) all over the country. My decision at the moment is to do nothing until the registration deadline approaches and hope that the powers that be will exempt these “trusts” from registration. If not, I may just not bother to register them. After all, if the institutions who I will one day reclaim the funds from do not need me to register, why should I bother to waste my time cluttering up the TRS with information which no-one will ever use.
Meanwhile, thanks to those of you who can maybe challenge HMRC on behalf of the little people like me who could do without the extra hassle.
The inability of HMRC to understand and then explain the elementary laws of property to its continental peers, preferring to treat trusts of any type as an avoidance or evasion vehicle, has led to this.
David Cameron and HMRC opted for selling out the ordinary Englishman to assuage the thirst for fiscal blood on the continent.
Everyone bought into the trust = avoidance frenzy and now look at the “outcome”. The UK voted for the Government who did not defend it, the fiscal Dracula now has a convenient drip feed into what is effectively no more than a headstone.
As Peter Harris points out the trust has long been an evil monster for Government and its agencies. TRS shows that a trust serves an array of entirely useful purposes, so that a long list of has had to be excluded.
Disclosure to HMRC for tax purposes has long been in force, protected by HMRC’s duty of taxpayer confidentiality. The problem with TRS is possible disclosure beyond HMRC.
The new Economic Crime Act institutes a register of overseas entities including trusts, identifying “beneficial owners”; in the case of trusts repeating the barmy approach of the PSC provisions. Disclosure to the Registrar is disclosure to the public with limited exceptions (in s22(1)(c) and(2) and s23).
While few would object about disclosure exclusively to a lawful authority, the almost total subversion of the right to privacy seems oppressive and unnecessary. Again it reflects the ludicrous assumption that trusts are inevitably a vehicle for cloaking nefarious activities so, even when they aren’t, the public have the right to know the intimate details of often highly personal arrangements.