Client set up a trust in 2014 in relation to the marital home with three children as trustees. As they have not had advice since and the registration rules were different then, they have only now been informed of the need to register, which we are in the process of processing now. Trust doesn’t produce an income and value of property is currently just under the IHT threshold.
My question is how will HMRC deal with the late registration is there a standard approach and does it include a penalty?
Genuinely don’t think the Trustees were aware of the change in rules and they have not gained from the late registration.
We’ve registered over 35 trusts late, HMRC have not penalised any of our clients.
TRSM80020
HMRC - Penalties for non-compliance will be applied on a case-by-case basis. Examples of the circumstances in which such a penalty might apply include continued failure to register a trust following repeated warnings or providing details on a given trust that are inaccurate, accompanied by continued failure to amend those details.
No automatic penalties will be issued by HMRC if you register your trust late: however, if HMRC becomes aware that you have failed to register your trust when you are required to then you may be charged a penalty.
I would just add to Richard’s exposition, of the current state of affairs as it does indeed stand, my perennial comment which I bang on about on here ad nauseam.
Professional advisers need to cover themselves by explaining briefly to their clients just what this kind of statement by HMRC is worth in each and every context where it appears.
Consider the second quoted paragraph. What does it really mean? Registering late is itself a failure to register. Are they saying that late registration will not be penalised (no never—well hardly ever, as aboard HMS Pinafore?) but non-registration discovered by them will be? I hope so but how often will the same person be able to register late without penalty?
There is an appeal procedure but if the complaint is that HMRC have acted unfairly based on a published statement of theirs rather than unlawfully the remedy is judicial review.
The theoretical penalty is huge. Compare also the detailed law imposing civil penalties for delinquent tax reporting that distinguishes failure to report from inaccurate reporting and sets differing levels of penalty linked to degree of culpability all backed up by the detail in the Compliance Handbook.