HMRC has recently published updated guidance on penalties for non-compliance with the Trust Registration Service (TRS)

What is the Trust Registration Service?

The Trust Registration Service is an initiative from HMRC, which operates exclusively online and requires all UK trusts which declare tax to HMRC, to register using the service. 

The service was set up in 2017 and was introduced as a way to notify HMRC of trusts where a tax liability has arisen or is likely to in the future. The TRS is also designed to help improve compliance with AML regulations.

Obligations on Trustees under the TRS

For trusts that fall within the net of the TRS, trustees must: -

• Register the trust by a certain date using the HMRC online portal
• Ensure that details of the trust and trustees are up to date 

Penalties 

Under the new guidance, HMRC may impose a fixed penalty of £5,000 upon trustees who fail to comply with their obligations under the TRS.  

Trustees should take comfort in the fact that a penalty will not be imposed where the failure to comply was not deliberate (provided trustee(s) take action to correct any errors within the time limit specified by HMRC). HMRC has acknowledged that “registering a trust is a new requirement and we recognise that trustees may not be familiar with the process.”

HMRC have confirmed that any decision to charge a penalty will be taken on a case-by-case basis.

The updated penalty guidance therefore represents a significant statement that HMRC intends to clamp down on deliberate non-compliance with the TRS. Under previous guidance, the maximum penalty for non-compliance was the greater sum of £300 or 5% of the outstanding tax.

Although innocent mistakes and omissions will not generally lead to fines under the new guidance, it remains to be seen whether HMRC will continue to adopt this lenient stance in the future. There is a chance that we may see fines imposed on trustees (particularly professional trustees) for non-deliberate failings to a greater extent, now that trustees have had time to familiarise themselves with the rules.  

Reviewing or Appealing a Trust Penalty Charge

HMRC have also released guidance on how to challenge a decision to impose a penalty charge for non-compliance with the TRS. The guidance sets out two routes of redress: -  

• Request a review by HMRC – A letter should be sent to HMRC within 30 days of receiving the penalty notice. The letter should set out why the decision is disputed. HMRC will then review the case and provide a response within 45 days.
• Appealing to a tribunal – Where a trustee does not wish to ask HMRC for a review or does not agree with the outcome of a review by HMRC, they can appeal to the independent tax tribunal. This can be done online, and the tax tribunal will generally provide a written decision within one month.  

Contact us

If you would like to speak to a solicitor about registering a trust or dealing with a trust penalty charge, get in touch with JMW today by calling 0345 872 6666, or fill in our online enquiry form to request a call back. For more information on trusts, visit our dedicated page.