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Our blog published in October 2022 provided details of HMRC’s penalties that they may levy against trustees who either fail to register a trust requiring registration on the Trust Registration Service (TRS) or who fail to maintain the trust’s details on the Trust Register once the trust has been registered.
HMRC has now provided some further guidance around when a penalty may be issued and what to do should a penalty notice be received. Whilst we are not aware of HMRC having issued any penalty notices to date (January 2023), their publication of this further guidance may be an indication that they may be considering starting enforcement action against trustees.
Reminder of registration requirements
As a reminder, trusts created before 4 June 2022, that are not excluded trusts, were required to be registered on the TRS by 1 September 2022. Any trusts created from 4 June 2022, that are not excluded trusts, are required to be registered on the TRS within 90 days of the date of creation of the trust. We would recommend that, if trustees have missed a deadline to register their trust, they consider taking action sooner rather than later to register the trust and not just to wait until HMRC issues a ‘nudge’ letter.
Once a trust has been registered on the TRS, the trustees have a duty to ensure that the information held on the Trust Register remains accurate and up-to-date. Should any information change, the trustees must update the Trust Register within 90 days of the date of the change.
HMRC’s power to levy penalties
In the event of a failure to register the trust or maintain its details on the Trust Register, HMRC has the power to levy a fixed penalty of £5,000 per offence against the trustees. The trustees are personally liable to pay these penalties (i.e. they cannot be paid from trust assets). HMRC will not charge interest on penalties.
HMRC has recognised that many trustees may not be familiar with the registration requirements and has stated that trustees will not be charged a penalty for failure to register or maintain a trust as long as:
- this was not deliberate behaviour by the trustees; and
- the trustees take action to correct the position within the time limit that HMRC will set.
HMRC will decide whether to issue penalties on a case-by-case basis.
If trustees receive a penalty notice from HMRC, this will be sent by post and will tell the trustees what action they need to take, the time limits that apply and how the penalty can be paid. More detail is provided in HMRC’s guidance.
If the trustees do not agree with HMRC’s grounds for the penalty, they can request a review or appeal the penalty.
Requests for a review must reach HMRC within 30 days of the date that the penalty notice was issued.
Where a review is requested, HMRC will normally respond within 45 days of the date of that the review request is received. During this period, the penalty does not need to be paid.
If HMRC upholds the penalty decision, any unpaid penalty will then need to be paid. If the penalty decision is not upheld, HMRC will then cancel the penalty notice and, if the penalty has already been paid, refund the penalty.
HMRC’s guidance on reviews provides more details on how to request a review.
If the trustees do not wish to ask HMRC for a review, or do not agree with the outcome of a review, they can appeal to a tribunal. An appeal must be received by HM Courts and Tribunal Service within 30 days of the date of issue of the penalty notice or the letter giving the outcome of a requested review.
HMRC may take action to collect payment of penalties during the period that a decision is being appealed.
HMRC’s guidance on appeals provides more details on how the appeals process works.
Paying HMRC’s penalties
Penalties can be paid in a variety of ways including through online banking by faster payments, BACS or CHAPS, by direct debit (if the payor is registered with HMRC’s online services), by a personal debit card, by corporate debit or credit card, at a bank or building society or by cheque. Full details are provided in this guide.
Registering trusts and updating the Trust Register
Trustees can register trusts or update the trust register via gov.uk.
Trustee Support Services can register trusts or update the Trust Register on the trustees’ behalf. Our fee for trust registration is £200 + VAT per trust (£240 including VAT). Our fee for updating the Trust Register will be based on a ‘time spent’ basis and will reflect the amount of information requiring registration. We are happy to provide a quote before performing the update.
We can also assist trustees by drafting deeds, for example, to add additional trustees, to retire or remove a trustee or to appoint trust benefits to a beneficiary. We will also advise what action the trustees will need to take once the deed has been executed, should the trustees wish to take this action themselves.