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Trustees, don't get caught out!

HMRC issues guidance on how trustees who don't register and properly maintain trusts may be fined

Last year, we brought you the news that most UK trusts had to register with HMRC's Trust Registration Service (TRS). Often, this even includes small trusts which do not need a tax return or to pay any tax. If you are the trustee of such a trust, not only are you legally obliged to register the trust, but you must then ensure that you keep the information held by the TRS about the trust up to date.

Initially, trustees were given a deadline of 1 September 2022 to register existing trusts that fell within the registration rules. Beyond that deadline, registration is now usually required within 90 days of creating a new trust. If there are any changes to the information about the trust, the trustees have 90 days to update the TRS records and, on 31 January each year, the trustees must declare that the trust details are up to date (for taxable trusts only).

Almost five months on from the 1 September 2022 deadline, HMRC has now published guidance on its website about when a penalty charge will be issued for not registering or maintaining a trust as well as how to pay a penalty charge - and how to ask for a penalty charge to be reviewed or to appeal it.

When will a penalty charge be issued?

HMRC will send a penalty letter to a trustee if it discovers that a trust, which should have been registered has not been, or if the details of a trust which has been registered have not been kept up to date. The penalty letter will advise the trustee on what needs to be done to rectify the failure and gives a date by which the trustee must comply. The penalty that HMRC can charge a trustee for non-compliance is £5,000 and it will consider whether to issue a penalty on a case-by-case basis. 

What if you are a trustee and have only recently become aware of the requirement to register your trust?

HMRC does recognise that registering a trust is a new requirement and the guidance says "trustees may not be familiar with the process" and so a penalty will not be charged as long as failure to register a trust or to keep the trust record up to date is not deliberate behaviour and action to correct the failure is taken within the time period that HMRC sets. 

What can you do if HMRC does issue a penalty charge?

HMRC gives further guidance for trustees who want a review of, or to appeal, a penalty charge. If a trustee receives a penalty letter, they have 30 days from the date the letter was issued to request a review of the charge. Likewise, a trustee can immediately appeal a penalty charge or appeal a review decision by notifying HMRC of their wish to do so within 30 days of the date of the issue of the penalty letter or review decision letter. 

Our advice

We would certainly recommend avoiding the need to request a review or appeal by ensuring compliance with the TRS requirements. Reviews and appeals can take a long time for HMRC to process and can be quite stressful particularly as, if you appeal a penalty charge, HMRC can still take action to collect payment of the charge while the appeal is processed. We have registered hundreds of trusts for clients and, although the TRS system and rules can be daunting, it is not as onerous as it at first appears to comply with the right advice and experience of the process. Do not put off reviewing your trust because HMRC will be unlikely to continue a lenient policy on penalty charges the longer the TRS remains in place and becomes more widely known about.

You may be surprised by which trusts need to register and there are only limited exemptions. If you have any involvement with a trust then, to prevent being caught out by the rules, assume that it likely needs registering and seek advice if you are not sure. 

Please do speak to your usual contact or one of our team of specialist lawyers and tax advisers if you have any TRS related queries or need help with registering or maintaining a trust on the TRS.

This article was also authored by Caroline Pellow, Practice Development Lawyer.


This article is provided for general information only and reflects the law at the date of publication. It does not constitute legal, financial, or other professional advice so should not be relied on for any purposes. You should consult a suitably qualified lawyer or other relevant professional on a specific problem or matter. Please see our terms and conditions for further details.