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HMRC internal manual

Trusts, Settlements and Estates Manual

Ownership and income tax: Specific types of property: shares: example 2: sole name - declaration of trust does not cover years in question

From 01/04/02 A holds 1,000 shares in company Y in her own name. A does not return the dividends for income tax purposes - instead her adult son B returns them for all years.

You need to consider what evidence there is that the beneficial ownership of the shares differs from the legal ownership. The fact that the son returned the income is not in itself evidence of a beneficial interest.

In response to a compliance check, A submits a declaration of trust dated 01/06/10. In it A states ’I hold the 1,000 shares in company X for my son B absolutely’.

Where the settlor makes a declaration that he or she holds the shares on trust, the transfer is effective at that date. [Milroy v Lord (1862) 4 De G.F. & G. 264: ER 45 Ch 1185.]

Any income from the shares after the 01/06/10 is taxable on B. There is no evidence that a written or oral that a trust existed before that date. So the dividends are taxable on A before that date.