Penalties for Not Registering or Maintaining a Trust

If you're a trustee of a trust that must be registered with HMRC, you're legally required to register it and keep the information up to date. Failing to do so can result in significant financial penalties. This article explains when HMRC can charge penalties, how much you'll pay, and what to do if you receive a penalty notice.

When HMRC can charge penalties

HMRC can issue a fixed penalty of £5,000 if you:

• fail to register a trust that should be registered with the Trust Registration Service
• fail to keep your trust's information up to date on the register

HMRC recognises that trust registration is a relatively new requirement and many trustees may not be familiar with the process. Because of this, they take a measured approach to penalties.

If HMRC discovers that you haven't registered your trust or that the information is out of date, they will send you a penalty letter first. This letter will explain what you need to do and give you a time limit to take action. You will not be charged a penalty if you correct the problem within the deadline HMRC sets.

Penalties are only issued on a case-by-case basis if you fail to take action within the time limit given, or if HMRC determines you have deliberately failed to register or maintain the trust.

How much you'll pay

The penalty for failing to register a trust or keep registration details up to date is a fixed amount of £5,000.

HMRC will not charge any interest on these penalties.

How to pay a penalty

If you receive a penalty charge, you must pay it within 30 days of the date on the penalty letter. If the deadline falls on a weekend or bank holiday, your payment must reach HMRC by the end of the previous working day.

What you'll need

Your penalty letter will include:

• a 14-character reference number starting with X
• the amount you need to pay

You must use this reference number when making payment. If you use an incorrect reference, there will be a delay in allocating your payment correctly and you'll receive a payment reminder.

Payment methods

You can pay your penalty online, which is the quickest method. Online options include:

• approving a payment through your online bank account (usually instant but can take up to 2 hours)
• Direct Debit through your HMRC online account
• debit or corporate credit card (there's a non-refundable fee for corporate cards; personal credit cards are not accepted)

For Direct Debit payments, you should set up the payment at least 5 working days before the due date the first time you use this method, or 3 working days if you've used the same bank details before.

You can also pay by bank transfer using these UK account details:

• Sort code: 08 32 10
• Account number: 12529599
• Account name: HMRC General Business Tax Receipts

If your account is overseas, use:

• IBAN: GB86 BARC 2005 1740 2043 74
• BIC: BARCGB22
• Account name: HMRC General Business Tax Receipts

All payments must be in pounds sterling. Your bank may charge you for using another currency.

For bank transfers:

• CHAPS or Faster Payments arrive the same or next working day
• Bacs payments take 3 working days to reach HMRC

You can also pay by cheque through the post or at your bank branch using a paying-in slip. If you pay by cheque through the post, allow 3 working days. Make cheques payable to 'HM Revenue and Customs only' and write your reference number on the back. Send cheques to: HMRC Direct, BX5 5BD.

How to challenge a penalty

If you disagree with a penalty charge, you have two options: request a review by HMRC or appeal to a tribunal.

Requesting a review

You can ask HMRC to review their decision by writing to:

HMRC Legal Group, HM Revenue and Customs, BX9 1ZT

You can also email: reviews@hmrc.gov.uk

Your request must reach HMRC within 30 days of the date on the penalty letter.

Include in your request:

• your name as shown on the penalty letter
• all reference numbers from the top of the penalty letter (including the 14-digit reference)
• the name of the HMRC officer or team at the end of the penalty letter

HMRC will review your case and reply within 45 days of receiving your request. If they agree with the original decision, they'll explain why. If they disagree, they'll cancel the penalty and refund you if you've already paid.

Appealing to a tribunal

If you don't want HMRC to review the penalty, or if you disagree with the outcome of their review, you can appeal to HM Courts and Tribunals Service.

Your appeal must reach the tribunal within 30 days of either:

• the date on the original penalty decision letter, or
• the date HMRC sends you the review outcome letter

You must include a copy of the penalty letter or review decision with your appeal, or the tribunal may reject it.

Paying during a review or appeal

HMRC will not take action to collect the penalty while they're reviewing their decision. However, they can still take action to collect payment while you're appealing to a tribunal.

Sources

• Ask for a review or appeal against a trust penalty charge
• Pay a penalty charge for not registering or maintaining a trust
• When HMRC will issue a penalty charge for not registering or maintaining a trust

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.