You may recall from our TRS special edition last year that from 1 September 2022, there was a significant change in the requirement to register trusts on the TRS with HMRC and to keep the information up to date. Most trusts, including those that were previously exempt, are now required to register on the TRS. Now that the dust has settled, we thought that we would update you on developments in this area since 1 September 2022.
HMRC have introduced penalties of up to £5,000.00 for not registering a reportable trust.
As HMRC recognises that the TRS is new and trustees may not be familiar with their obligation to register, the penalties for non-registration or for not keeping the information up to date will be dealt with on a case-by-case basis. HMRC has confirmed that a penalty will only be applied if the trustees are aware of the requirement to register/update and have deliberately failed to do so, or continue to refuse to do so within a set timeframe provided by HMRC.
In the first instance, HMRC will contact the trustee(s) via letter to inform them of their requirement and provide a date to register or to update the details by. If the trustees have not done so by the deadline, HMRC will issue a penalty.
HMRC has also issued guidance on the procedure to request a review of the penalty charge if the trustee disagrees with it. A request for review must be received by HMRC within 30 days of the penalty letter being issued.
Trustees can appeal the penalty charge, either instead of or in addition to the review. This must be done within 30 days of either the penalty decision letter (if not requesting a review), or the letter advising that a review has been rejected.
Prior to 31 January 2023, HMRC’s guidance was that neither authorised nor unauthorised unit trusts had to be registered on the TRS, on the basis that HMRC did not consider them to be express trusts.
On 31 January 2023 the guidance changed so that any unauthorised unit trusts must now register on the TRS if they meet the general registration requirements. This change is likely to capture most JPUTs, as such trusts are likely to be liable to at least one UK tax, most likely stamp duty land tax (SDLT).
JPUTs are one of the most commonly used trust structures in UK real estate ownership and this change to the guidance is likely to mean an increase in the number of trusts that are required to register. Trustees of JPUTs should check whether the trust needs to be registered on the TRS and if in doubt, seek legal advice.
On 1 April 2023 reporting requirements for the TRS were extended. Since September 2022, businesses subject to the Money Laundering and Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 are required to check the TRS when onboarding new client trusts. This has now been extended to impose an ongoing obligation to continually conduct checks for discrepancies between the information on the TRS and the transaction at hand (including the trust’s actual business activities and/or parties).
HMRC has provided an online form to report material discrepancies, which could include (but are not limited to):
With the majority of trusts now being required to register on the TRS, many low-risk trusts will be caught by this extension to the rules, placing a heavier due diligence burden on many businesses than would previously have been necessary.
This will depend on whether you are reading this as a trustee or a beneficiary, or perhaps someone who offers legal, accountancy or investment services to clients.
At Greenwoods Legal LLP we have the expertise and knowledge to provide clear and concise advice in relation to the TRS. If you have any queries or concerns regarding a property transaction or trust that you are planning or involved with, please get in touch.
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