Just met some potential trustee clients whose discretionary trust was valued at 81% of the NRB at the 10th anniversary. What is the worst that can happen if they fail to report this?
Any penalty is limited to the tax payable: s245(5). But it does not cover a subs (2)(b) penalty of £60 per day after the failure to deliver has been declared by a court or tribunal. Subs (6) prevents the daily penalty if the account is filed before proceedings commence.
Watch out for subs (4A) if there is a positive liability, however small. A delay in filing of more than one year raises the fixed penalty from £100 to £3000, so is not tax-limited. Under s250 a 3 year limit applies for recovery of penalties but this runs only from its notification by HMRC.
HMRC has a power of mitigation in s250. IHTM36000 is essential reading for HMRC’s practice on penalties. IHTM36175 “Calculating the penalty: de minimis limits for seeking a penalty” says only, but four times, “(This content has been withheld because of exemptions in the Freedom of Information Act 2000)”. So there is a limit but it is a secret.
A person regulated by The Carnivorous Minotaur of The Cube would be well-advised to avoid a penalty, if a trustee, and to warn of and disown in writing any possible action by lay client trustees proposing to do so. Lay clients are notorious postmasters at turning on their advisers after a pooh/fan interface. Given the small amount of extra professional time involved in filing forms IHT100 and 100d, now the work has been done to arrive at 81%, is it even worth 'phoning or writing to HMRC to ask the question?
Someone on here may have had experience of their de minimis practice. I doubt the tolerance level is high since generally HMRC are not keen on writing off, in effect, tax due and payable but presumably here none such exists because of the NRB. However the forms do also provide information and often the first 10 year anniversary is the first time they learn of the RPT’s existence. It ought not to be because there should have been an earlier CLT, requiring a IHT100 and100a, but that might have been excepted under Regulation 4 of SI 2008/605.
Jack Harper