Trust registrations: Be on time to avoid a hefty fine

HMRC has confirmed the penalties that will apply where trustees fail to register on time or fail to keep the register up to date. The penalties are imposed under Part 9 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

HMRC have confirmed that where trustees appeal the penalties the details of this process will be set out in any penalty notices issued.

Failure to register on time

Where the trustees fail to register the trust a £5,000 penalty may apply per offence. This means that where this is a deliberate act on behalf of the trustees the penalty will apply.

However, HMRC have confirmed that in recognition of the fact that the registration requirements are new and an unfamiliar obligation for trustees there will be no penalty for a first offence, either for failure to register or late registration, unless this is due to deliberate action by the trustees.

What this means for the trustees is that, should HMRC become aware of a trust which has not been registered by the relevant deadline, a warning letter will be issued. The trustees ought to register the trust within the deadline stipulated in the letter, otherwise a fine may be issued to the trustees.

Where deliberate non-compliance takes place, each case will be looked at individually by HMRC.

Failure to keep the information held on the Trust Registration Service (TRS) up to date

Where the lead trustee fails to keep the register up to date they may be fined a £5,000 penalty and, similar to failure to register a trust, where this is a deliberate act on behalf of the trustee the penalty will apply.

Again, HMRC have also confirmed that there will be no penalty for a first offence, unless the failure is shown to be due to deliberate behaviour on the part of the trustees.

In a similar vein to the failure to register a trust, where the trustees do not keep the information on the TRS up to date, HMRC will issue a warning letter to the lead trustee. They will be given a specific time period in which to update the information before a penalty applies.

HMRC have set out what information they expect to be kept up to date here - TRSM32010.

Where more than one piece of information is being updated, and is outside of the timeframe where a penalty becomes payable, HMRC have confirmed that only one penalty will apply.

This is one of the last remaining missing pieces in the TRS puzzle, keenly anticipated and subject to considerable speculation, from optimistic announcements that HMRC will be very lenient in their penalty approach to one confident statement from a well-known firm of solicitors only two weeks ago that “HMRC have indicated that they will begin issuing penalties (from £100 to £300) to trustees for failure to comply with registration requirements immediately after 1st September 2022”.

It was anticipated that there will only be “nudge letters” for the first time offenders, however, the level of the proposed fine, at £5,000, has come as a surprise. Trustees need to be aware that if they receive such a penalty, this will be their personal liability, i.e. they will not be able to use the trust funds to pay it. (Note that trust funds can usually be used to pay an agent’s fee for the TRS registration).

Another point to remember, for those trustees who may think that they don’t need to register their trust until they receive a letter from HMRC, is that, without a proof of registration, trustees of registrable trusts will not be able to deal with financial institutions or professional advisers.

You can find out more about trusts by reading our ‘trusts explained’ article here, or get in touch with a TPO adviser
The information in this article is correct as of 23/08/2022.
Please note that the Financial Conduct Authority (FCA) does not regulate trust advice.