Chris Etherington

Written by: Chris Etherington

Chris Etherington

Partner

Trust registration: has HMRC’s indecisiveness left taxpayers vulnerable to fraudsters?

As dates in the diary go, few will recognise 5 March 2018 as significant but for thousands of trustees, it marks the passing of the first Trust Registration Service deadline, with the prospect of penalties now looming large for some trustees.

The trouble is, until the actual day of the deadline, nobody knew what the penalties would be if trustees failed to meet the requirements of the catchily titled UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. This vacuum of information from HMRC has led to uncertainty that could be readily exploited by fraudsters.

The Regulations were made law in June 2017 in order to enact an EU Directive and its main impacts were broadly twofold: HMRC would have to operate a register of trust information, and taxpaying trustees would be required to submit another return to HMRC with information on their beneficiaries.

Up until deadline day, trustees have been left to speculate how HMRC might use the powers granted to them in the Regulations to ‘impose a penalty of such amount as it considers appropriate’.

We now have some clarity, albeit informally from correspondence published on the blog of the Society of Trust and Estate Practitioners. That indicates that HMRC will not automatically issue penalties; a pragmatic approach which is to be welcomed, perhaps acknowledging that the process in this first year has been challenging to say the least.

An ‘administrative penalty’ can still be charged however if HMRC consider trustees have not taken reasonable steps to submit their returns on time, with the amount due to HMRC reflecting the delay in submitting the return:

  • up to three months late: £100; 
  • between three and six months late: £200; 
  • more than six months late: the higher of 5 per cent of the tax liability or £300. 

HMRC has recently warned that attempted fraud relating to tax payments is on the rise, with bogus calls and emails and text messages scams seeking to con taxpayers.  

Having taken positive steps to tackle this type of crime in the past, HMRC has now put taxpayers in the unsatisfactory position of being subject to penalties without also putting a formal penalty system in place. Trustees should therefore be on guard if they receive requests for penalty payments as the door has been left wide open for fraudsters to exploit HMRC’s indecision.

 
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