On 8 December 2017, HMRC announced that while the 31 January 2018 deadline for making a Trust Registration Service (TRS) return would remain in place, it would not charge a penalty if trustees, or an agent acting on behalf of the trustee, failed to register their trust on the TRS before 31 January 2018, but registered no later than 5 March 2018. This deadline has now passed, but HMRC has explained that penalties will not automatically be charged for late TRS returns.

HMRC has decided to take a pragmatic and risk-based approach to charging penalties, particularly where it is clear that trustees or their agents have made every reasonable effort to meet their obligations under the regulations. It will also take into account that this is the first year in which trustees and agents have had to meet the registration obligations.

While information suggests that most TRS returns have been filed, if a charity has not yet completed its TRS registration(s), it is being encourage to do so as soon as possible.

When penalties can be issued

Penalties can be charged for administrative offences relating to a relevant requirement. These are:

• a requirement to register using the TRS by the due date of 31 January after the end of the tax year in which the trustees pay tax on trust assets or income, and
• a requirement to notify any change of information by the due date of 31 January after the end of the tax year in which the trustees pay tax on trust assets or income.

For administrative offences, HMRC will charge a fixed penalty to reflect the period of delay:

• Registration made up to three months from the due date: £100 penalty
• Registration made three to six months after the due date: £200 penalty
• Registration more than six months late: the greater of 5 per cent of the tax liability or a £300 penalty

There is currently no facility to notify HMRC of any change of information online and, as such, it will not charge penalties for a contravention of this requirement until the online function is available.

A penalty will not be payable if HMRC is satisfied that the charity has taken reasonable steps to comply with the regulations.

HMRC also has the  power to apply a penalty for money laundering offences under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017/692. These offences are more serious than administrative offences. However, HMRC will not bring these penalties in immediately. It intends to consult on the structure of these penalties later this year, to ensure the penalty regime is fair and proportionate, while tackling money laundering offences.