HMRC has now updated its guidance on penalties for failure to comply with the legislation of the registration of trusts which had tax liability.

Now that the deadline of 5 March 2018 for the registration of trusts which had a tax liability in the 2016/17 tax year has passed, HMRC has now updated its guidance on penalties for failure to comply with the legislation.

If trusts are not registered or changes to client information updated by the relevant deadline and it cannot be shown to HMRC that reasonable steps were taken to try and register or update details then the penalties are as follows:

  • £100 if submitted within 3 months of the deadline
  • £200 if submitted between 3 and 6 months form the deadline
  • £300 or 5% of the total tax liability in the relevant year (whichever is higher) if submitted after 6 months from the deadline

HMRC have advised that penalties will not be automatically issued and will be reviewed on a case by case basis. They will also take into account that the tax year 2017 to 2018 is the first year that trustees and agents have had to meet these new registration obligations.

It should be noted that the HMRC's facility to make changes to client information via the portal is still unavailable, there is no clear indication as to when this will become accessible. Penalties will not be charged for failure to register changes until the system becomes available.

HMRC can also charge penalties for money laundering offences which are considered more serious than administrative offences. However these penalties have not yet been formalised, with consultation taking place later this year.

As a reminder going forward:

  • New trusts established in the 2017/18 tax year will need to be registered by 5 October 2018 in order to obtain the Unique Taxpayer Reference if they have an income tax or capital gains tax liability.
  • Existing trusts with a tax liability need to register by 31 January 2019. Those taxes applicable are not just income tax or capital gains tax but also inheritance tax, stamp duty land tax, stamp duty reserve tax and land and buildings transactions tax for Scotland.
  • Changes to trust information must be notified to HMRC by 31 January of the tax year after the trust was set up or the trust starts to make income or chargeable gains (if this is later).
  • The appropriate box on the trust and estate tax return should be ticked to confirm that the trust registration service has been updated.