Trustees and ‘Relevant Persons’: New Guidance on Penalties for TRS Failures
Trustees and their advisors should note updated HMRC guidance on penalties for failure to register or maintain details of a trust. Notably, the reference to ‘deliberate behaviour’ in previous guidance has been removed.
Its requirements for professionals involved in registrable trusts have also been tightened.
HM Revenue and Customs is responsible for administering the Trust Registration Service (TRS) register and can issue penalties for non-compliance. Now that the TRS is pretty well established, trustees and their advisors must make sure they maintain compliance with the rules.
By way of reminder, most trusts should be registered within 90 days of creation, even if they are non-taxable (under the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020). These include:
· All UK express trusts (even if non-taxable), discretionary trusts and declarations of trust of co-owned property (if the trustees and beneficiaries are not identical)
· Non-UK non-taxable trusts acquiring land or property in the UK, with at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK
· Will trusts arising on death where the trustees hold trust assets for at least two years
Changes to a registered trust must be notified to HMRC within 90 days. The information HMRC requires has been expanded, to include details of each individual associated with the trust (this includes details of named potential beneficiaries).
Failures on the part of trustees to register on time risk a £5,000 fixed penalty per offence. Similarly, trustees also risk a fine for failing to keep the TRS updated.
HMRC would, however, first issue a warning letter to the trustees or agents – failure to comply within a stated time period may then lead to a penalty, though each case will be dealt with on its specific facts. Penalties can be reviewed - or appealed within 30 days.
HMRC has recently released three separate pieces of guidance on penalties, including on appeals: · HMRC (when a penalty will be issued) · HMRC (reviews and appeals) · HMRC (how to pay)
Professionals involved
Any professional, such as lawyers, involved with registrable trusts are now required to be alert to any discrepancies between the trust’s actual business activities and individuals – and the information registered with TRS. This is an ongoing obligation and trustees must report any discrepancies identified to HMRC.
In addition, there is a new requirement to report any ‘material discrepancies’ between the wider information they hold on the trust and the information on the TRS excerpt of the register. HMRC
defines material discrepancy as a discrepancy that may reasonably be considered to be linked to money laundering or terrorist financing; or to conceal details of the business of the trust. The latest version of the TRS Manual can be found here.
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