Trust Registration Service update: new HMRC guidance on penalties for late registration

With less than a month to go until the 1 September deadline to register trusts that fall within the expanded scope of the Trust Registration Service (TRS) regime, HMRC has published guidance on how penalties will be imposed for late registration.

HMRC states: “In recognition of the fact that the registration requirement is a new and unfamiliar obligation for many trustees, 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”.

However, it should be borne in mind that penalties can be substantial. HMRC may impose fines of £5,000 per trust if it considers that failures to register have been deliberate.

Trustees can feel reassured that the guidance confirms warning letters will form an important part of the enforcement regime: “In practice this means that should HMRC become aware of a trust which has not been registered by the relevant deadline – either because that trust has been registered late or because HMRC have identified that trust’s existence by other means – HMRC may issue a warning letter to the trustee or agent”.

Whilst this guidance should instil confidence that innocent mistakes will not be unduly penalised, it is nonetheless important that trustees ensure they register on time to avoid embarrassment. Fines for repeated failures could mount up and there is the potential for some trustees to be caught out. Moreover, once the regime becomes embedded the guidance may change and HMRC may well take a firmer line, particularly for professional trustees.