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HMRC internal manual

Trusts, Settlements and Estates Manual

Ownership and income tax: Specific types of property: bank and building society accounts: example 10: joint names - declaration of trust

A (an additional rate taxpayer) contributes 100% of the funds in a savings account held in the name of A, B (A’s wife) and their adult daughter C.

The bank operates its usual policy and allocates the interest one third each to A, B and C when informing HMRC of the amounts under the usual third party arrangements.

In the course of a compliance check, HMRC finds that A provided all the funds, but he has not self assessed on any of the interest. A says that the income does not belong to him to any extent and that the income should be taxed half each on B and C.

A produces a ‘declaration of trust’. It says that the interest in the account for year 2009-10 belongs to B and C. The ‘declaration’ is dated 5 April 2010. But even if the declaration is valid, (i) the entitlement to income applies only from 5 April 2010 (TSEM9520), and (ii) even if the right to income had been validly transferred, there is no evidence that the right to ownership of the underlying property has been transferred, and the Settlements legislation applies (TSEM9170).

A is taxable on all the interest for 2009-10.