The deadline for registering non-taxable trusts with the Trust Registration Service (TRS) passed on 1 September. HMRC now can issues fine for not keeping information up to date. Gerry Brown, consultant with QB Partners, explains how fins work and what trustees can do if they have not yet registered their trust.
Non-taxable express trusts that were in existence on or after 6 October 2020 must have registered within 90 days of becoming registerable (unless exempt), or on or before 1 September 2022 (whichever is later). Registrable non-taxable express trusts established on or after 3 June 2022 (which is 90 days before 1 Sep 2022) must register within 90 days of the trust’s creation.
Trustees of trusts required to register with the TRS have two duties:
- to register the trust, and
- to keep the information held on TRS up to date.
Failure to register or keep information up to date on time may lead to a financial penalty.
Earlier this month HM Revenue & Customs (HMRC) published additional material in its Trust Registration Service Manual (TRSM). HMRC clearly recognise that the registration requirement is a new and unfamiliar obligation for many trustees and has stated: “Accordingly there will be no penalty for a first offence of failure to register or late registration of a trust unless that failure is shown to be due to deliberate behaviour on the part of the trustees.”
Failure to register due to deliberate behaviour on the part of the trustees, could result in a £5,000 penalty per offence.
What is deliberate behaviour?
The guidance is somewhat vague on this point but suggests that if HMRC become aware of a trust which has not been registered by the relevant deadline, because the registration was made late or perhaps because HMRC have identified the trust’s existence by other means, a warning letter may be issued to the trustee (or agent). If the trust is not yet registered, it should be registered immediately. If registration is not effected within a time period specified within the warning letter, or the trustee fails to explain why the trust is not liable to registration, a penalty may be issued to the lead trustee.
HMRC has indicated that penalties for deliberate non-compliance will be applied on a case-by-case basis.
In addition to the requirement to register, trustees are obliged to ensure that details on the TRS are kept up to date. Failure to update trust details could incur a penalty.
HMRC must be notified within 90 days of a trustee becoming aware that any of the information provided about a registered non-taxable trust has changed.The change will usually relate to a change in status of;
- settlor
- trustees
- beneficiaries
- any individual who has control over the trust (e.g. a protector)
As with a failure to register, failure to keep the information up to date may lead to a warning letter with no penalty attached. The warning letter will remind the trustees of the obligation to keep information up to date on TRS.
Of course trustees will have a right to appeal to appeal any penalties charged.The penalty notices issued will contain details of the appeals process.
Paraplanners should build a question on trust changes into the annual review package.
