We received on 5 March 2018 the following statement from HMRC regarding late filing penalties for the Trust Registration Service.
The statement notes that a tax-geared penalty will apply to any registration which is over six months late, being 5% of the tax liability. By ‘tax liability’ HMRC have confirmed in separate correspondence that the 5% penalty will be calculated based on the total of any tax paid by the trust in the relevant year, which may include IHT, SDLT, LBTT and SDRT as well as income tax and capital gains tax.
We also asked HMRC about the position for agents who, due to the adverse weather in the run up to the deadline of 5 March, have struggled to complete TRS returns as staff have not been able to get to the office. HMRC have confirmed on 6 March that, where the recent adverse weather has impacted upon a taxpayer or agent's ability to submit a TRS registration before the 5 March deadline, a penalty will not be imposed as long as it is clear that reasonable effort has been made to meet the TRS obligations.
We are advised that the details of the penalty regime will be made available on GOV.UK in due course.
“On 8 December 2017, HMRC announced that while the 31 January 2018 deadline for making a Trust Registration Service (TRS) return would remain in place we would not charge a penalty if trustees, or an agent acting on behalf of the trustee, failed to register their trust on the TRS before 31 January 2018 but no later than 5 March 2018.
HMRC will not automatically charge penalties for late TRS returns. Instead we will take a pragmatic and risk based approach to charging penalties, particularly where it is clear that trustees or their agents have made every reasonable effort to meet their obligations under the regulations. We will also take into account that this is the first year in which trustees and agents have had to meet the registration obligations.
While our information suggests that most TRS returns have been filed, if you have not yet completed your TRS registration(s), you should do so as soon as possible.
When penalties can be issued
Penalties can be charged for administrative offences relating to a relevant requirement.
- a requirement to register using the TRS by the due date of 31 January after the end of the tax year in which the trustees pay tax on trust assets or income and
- a requirement to notify any change of information by the due date of 31 January after the end of the tax year in which the trustees pay tax on trust assets or income.
The administrative offences penalty
HMRC will charge a fixed penalty to reflect the period of delay:
- Registration made up to three months from the due date – £100 penalty
- Registration made three to six months after the due date – £200 penalty
- Registration more than six months late – either 5% of the tax liability or £300 penalty, whichever is the greater sum.
There is currently no facility to notify HMRC of any change of information online and, as such, we will not charge penalties for a contravention of this requirement until the online function is available.
A penalty will not be payable if we are satisfied you took reasonable steps to comply with the regulations.
HMRC also has the power to apply a penalty for money laundering offences under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017/692.
These offences are more serious than administrative offences. HMRC will not bring these penalties in immediately. HMRC will consult on the structure of these penalties later this year, to ensure the penalty regime is fair and proportionate whist cracking down on money laundering offences."