Lay trustees oblivious to periodic charge

My new clients are lay trustees who are not conversant with the intricacies of trust taxation. I have recently drawn their attention to the fact that they may have inadvertently failed to notify HMRC of periodic charges which became due.

The salient facts are:

  1. The original settlement was approximately £200,000
  2. The settlor made no other gifts in the 7 years prior to this
  3. The settlor died on 17/12/2002 when the trust was valued at
  4. The 10th anniversary value of the trust on 25/5/2009 was
  5. The 20th anniversary value of the trust on 25/5/2019 was
    Will HMRC apply penalties? If so, how much would you expect?

Am never quite sure which statutory provisions apply as I believe some were introduced but have never actually come into operation and IHT, CGT and Income Tax are not all subject to the same penalty provisions.

It seems the trust was created in May 1999. The first periodic charge arising in May 2009.

Under IHTA 1984 s216(1)(c) and (6)(ad) trustees required to deliver an account to HMRC within six moths from end of month in which the periodic charge arises.

In principle, accounts were required to be filed by 30 November 2009 and 30 November 2019 in respect of periodic charges arising in May 2009 and May 2019.

Failure to file relevant accounts (under IHTA 10984 s216) give rise to penalties as provided in IHTA 1984 s245.

As neither of the two required returns have been filed the penalties for each of the two failures is made up of:
£100 plus (s245(2)(a))
£100 plus (s245(3)
up to an additional amount of a maximum of £3,000 (s2454A).

The above are subject to limits as provided in s245(5), (6) and (7).

There is no penalty regime applicable to late payments of IHT. However, interest may accrue on overdue IHT [IHTA 1984 ss 226 & 233]

Malcolm Finney