As we reminded you last month, 1 September 2022 is the deadline for registering non-taxpaying trusts that existed on 6 October 2020 on HMRC’s Trust Registration Service (“TRS”). This applies even if the trust has since been closed. More clarity is now available on the potential penalty position for failure to register a trust.
According to a recent update to the TRS Manual by HMRC, failure to register or keep information up to date on time may lead to a financial penalty. Penalties for failure to register or keep information up to date are imposed under Part 9 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Trustees will be able to appeal any penalties charged. Details of the appeal process will be set out in any penalty notices issued.
The potential penalty for deliberately failing to register a trust is a maximum penalty of £5,000. In practice this means that if HMRC becomes aware of a trust which has not been registered by the relevant deadline, either because that trust has been registered late or because HMRC has identified that trust’s existence by other means, HMRC may issue a warning letter to the trustee or agent.
If the trust is not yet registered, the trustee or agent should register it at that point. If the trustee or agent then fails to register the trust within the time period stated within the warning letter, or fails to explain why their trust is not liable to registration, a penalty may be issued to the lead trustee.
According to the manual, penalties for deliberate non-compliance will be applied on a case-by-case basis. Examples of the circumstances in which such a penalty might apply include continued failure to register a trust following repeated warnings or providing details on a given trust that are deliberately inaccurate accompanied by continued failure to amend those details.
HMRC also recently posted the following on the Agent Forum “We are working hard to ensure customers understand what they need to do with the introduction of the Trust Registration Service. We are regularly communicating with people through our own channels and intermediaries to ensure we reach as many people as possible. We expect registration levels of non-taxable trusts will increase given that the requirement to register is a new one for many trustees, and the deadline is still some months away.
The requirement to register with the Trust Registration Service is a new one for many trustees, and we anticipate some trustees will remain unaware of the obligation to register once the deadline has passed. Penalties for failing to register or late registration will only be charged where it can be shown the failure was deliberate.”