Trust Register and Junior ISAs

Geoff Parker indicates clearly that the criticisms made by me and others are not just academic indulgence.

As to potentially disregarding the law, it would be well to bear in mind the penalties. Regulation 76 allows HMRC to “impose a penalty of such amount as it considers appropriate”. There is an appeal under Regulation 99 but apparently only the decision, not the amount, leaving that to judicial review. An inexpensive and straightforward route (hollow laughter off).

HMRC in their online guidance for trustees has consistently said only “You may have to pay a penalty if you do not register the trust before the registration deadline”. (It is not clear whether their manual guidance at MLR1PP15000 is in point).

The Government said a little in the Condoc of 21 February 2020:". As 5MLD extends registration to non-taxpaying trusts, the government proposes to introduce a new penalty regime for TRS. 3.28 The proposed penalty regime is: • For the offence of failure to register there is no financial penalty, but a notification (nudge letter) would be sent to the trustee setting out their responsibilities • For the first offence of the failure to update details within the time limit there would be no financial penalty, but a notification would be sent to the trustee reminding them of their obligations and the time limit for updating the register • For a second and each subsequent offence of a failure to update details within the time limit, there would be a proposed set penalty of £100 per offence 3.29 In addition, it is proposed that: 12 • Any trustee found to have failed to register or failed to register on time deliberately, rather than as a result of a genuine mistake through lack of awareness, may be subject to a financial penalty in the first instance rather than a notification • Any trustee found to have deliberately failed to update details on the register or failed to update their details on time may be subject to a financial penalty rather than a notification • There will be an appeals process against any penalty issued, which trustees will be able to follow if they consider they have a reasonable excuse for not complying with the requirements to register on or update the trust register 3.30 This penalty regime relates to the registration and updating of details on TRS"

In the Summary of Responses of 15 July 2020: “2.33 The government recognises the need for effective and proportionate penalties for failures to register and keep information up to date on TRS, whilst also understanding that any penalty regime needs to reflect the extensive use of trusts throughout the UK and the fact that initially many lay trustees may not be aware of their obligations regarding TRS. The government is considering how best to raise awareness of TRS and of the obligations on trustees to register and keep information up to date. 2.34 The government intends to proceed with the proposed penalty regime as outlined in the consultation document”.

When a new tax looms HMRC usually start out by drafting assiduously all the more exciting (to them) enforcement provisions, including penalties and search and seizure, while apparently much paying less attention to the substantive rules (like those in the TRS for non-taxable trusts). Here they seem to think that they can bring in a registration regime without announcing their approach to penalties, despite the width of Regulation 76. Hubris. If anyone knows of a further development since July 2020 can they please tell us?

Jack Harper

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I have just received a reply from HMRC

“we have been progressing this query with colleagues, and we can confirm HMRC’s view that Junior ISAs, like Child Trust Funds, are not express trusts and therefore not required to register on TRS. We are in the process of adding this confirmation to the TRS Manual.”

Kim Jarvis

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It is concerning that HMRC appear to be dealing with these issues on a piecemeal basis. What of Premium Bonds or other non-cash National Savings held by parents for their children? Are these considered to be express trusts by HMRC or not? And for parents who are professionals like all of us, will the penalties be applied more severely on the basis that we should have been able to read HMRC’s mind?

For those of us of a certain age and musical taste, there is Answers? Questions! Questions? Answers! by Focus. We are only through the first half of the track…

Anthony Kalp
Berry & Lamberts LLP

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The need for user interpretation of obscure regulation borders on the unconscionable (because subjecting the impoverished to draconian penalties: one has only to look at a NY Times report on humongous ($500,000) penalties on recipients of disability payments for failure to report timely changes in circumstances) persecution of parents generally and more specifically parents of SEN infants. The formalities incumbent in trustees of Vulnerable Person Trusts may be understandable. But what of Payable (Transferable) on Death Accounts, Uniform Gifts to Minors Accounts or for that matter foreign life assurance policies? My daughter is a barrister training to deal with cases of autistic and other SEN children; I am a semi-retired NY lawyer. I thought the IRS (Ogden UT) enforcement of US tax laws on cross-border trusts — laws they seem not to understand very well, especially working from home — was bad. HMRC may be more indulgent but that doesn’t offer certainty to the UK taxpayer trying to meet obligations and avoid penalties.

A slight digression though very much related to this topic - what are thoughts on bare Trusts for minors in Wills e.g. to my granddaughter X upon 18years old, the sum of £2,000?

Because of the narrow wording of the HMRC TRS manual ( TRSM23160):
.…], trusts created in the course of opening a bank account for a minor child or person lacking mental capacity are excluded from registration as express trusts

My (reluctant) interpretation is that an Exec/Trustee cannot avoid TRS by opening such a bank account because the Trust has arisen from the Will (express Trust) and therefore not “in the course of opening a bank account”.

I wondered what people are doing/advising on practical level in such cases? For example, in most cases it would be disproportionate for a solicitor to continue as professional Trustee for such a Trust

I would hope to pay out to a parent under an express power (eg STEP Admin cl.18.1) and they can then open an account which qualifies for the exclusion.

I agree it is difficult if that is not an option.