- Initially there was a registration obligation on trusts with a UK tax consequence
- Later came the system for making annual declarations of conformity by such taxable trusts
- Then the obligation to register express trusts regardless whether they have a tax consequence
- Financial institutions have recently become much more focussed on ensuring the registration of entities seeking to (e.g.) open bank accounts or invest monies
- Most recently HMRC have begun publicising the scope for penalties to be charged in instances of non compliance
A penalty of £5,000 for deliberate non compliance has been much bandied about in our industry of late and until recently it was unclear where this number came from.
The answer is that it stems from para 76 of “The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations (2017)” and an awkward aspect is the wording “A designated supervisory authority may … impose a penalty of such amount as it considers appropriate on P”
In other words, £5,000 is just a number which HMRC have conjured up as being appropriate rather than being fixed in quantum by the rules.
Conscious that I might so far sound like the prophet of doom, it’s important to note that there’s no public record of any fines yet having been issued and that HMRC are saying only deliberate non compliance will be penalised, with suspected non compliers being given written warnings with a view to them becoming compliant and avoiding a penalty.
So currently only those trustees actively seeking to shirk their obligations need worry about these penalties.
Nonetheless it is worth reflecting on some (but not all) of the circumstances in which registration can become required:
- Any trust with a UK liability to a direct tax
- Bare trust arrangements, subject to limited exceptions (e.g. bank accounts for minors)
- Property ownership where the registered and beneficial owners are not an identical group of persons
- Estate’s of a deceased person which exist for longer than 2 years after date of death
- Life assurance holding trusts which are not brought to an end within 2 years of death
- Will trusts which are not brought to an end within 2 years of death
The next step
If you are unsure of the registration or tax obligations of an arrangement to which you are party, please speak to Graham Boar or your usual UHY contact to discuss your situation.
