Meg Saksida looks at the penalty system for those who have not registered with the Trusts Registration Service in time.
To comply with anti-money laundering regulations, the trustees of most trusts must register with the Trust Registration Service (TRS). This registration requirement is for trusts that pay one or more of income tax (IT), inheritance tax, capital gains tax (CGT), SDLT and SDRT in England, LBTT in Scotland and LTT in Wales.
Who and when?
Many trusts will also need to register even if they are non-taxpaying. For example, all UK resident express trusts must register (unless subject to an exclusion, such as for charitable trusts). Express trusts resident outside the UK will also have to register to the extent that they acquire UK land or property or have at least one trustee resident in the UK and enter into a business relationship with the UK.
If the trustees do not register by the appropriate date (see below), they are at risk of HMRC sending them a penalty letter.
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Trust created |
Taxable trusts |
Non-taxable trusts |
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On or before 6 October 2020 |
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On or before 1 September 2022 |
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After 6 October 2020 (Non-taxable) |
Register within 90 days of the trust being either created or becoming liable for tax, or on or before 1 September 2022 (whichever is later)
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On or after 6 April 2021 (Taxable) |
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Before 6 April 2021 |
Register before 5 October in the tax year after the one in which the trust both started to receive income or has gains or become taxable to IT or CGT |
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Penalties for non-compliance
Penalties can be issued for both not registering a trust and for not keeping the trust registration information up to date. The penalties will not be automatic but issued on a case-by-case basis.
In their recently published guidance, HMRC stated:
“Registering a trust is a new requirement and we recognise that trustees may not be familiar with the process. We will not charge you a penalty if we find out that you have failed to register or to maintain trust, as long as this was not deliberate behaviour [and] you take action to correct this within the time limit we set. We will only charge you a penalty if we decide you deliberately failed to register a trust or to update its details.”
This gives trustees some flexibility. However, in cases of deliberate non-compliance, there may be a fixed penalty of up to £5,000.
How to ask for a review
If a trustee does not agree with a penalty charge, they can ask for a review of their situation and the penalty. The review request must be sent to HMRC within 30 days of the issue of the penalty letter.
HMRC will normally respond within 45 days of the request for the review.
Appealing the charge
The other option available to a trustee is to appeal to a tribunal. This can be done either as a result of an unsuccessful review, or directly without having requested a review. The appeal must be made to the tribunal within 30 days of either the issue of the penalty letter or the result of the review letter, whichever is appropriate.
If the appeal route is being taken directly without the review having been requested previously, HMRC will not collect the penalty during the period of consideration of the appeal by the tribunal. If the review process has already been carried out, HMRC can collect the payment of the penalty whilst the appeal is progressing.
Practical tip
During both the review process and the direct appeal process (where a review has not been already requested), HMRC will not collect the penalty. The review or appeal may therefore be a good strategy for a trustee to take for cashflow purposes, even if they feel that the penalty is deserved and is unlikely to be overturned.
