HMRC is to cancel fines imposed on people who failed to declare the trusts they own, thereby contravening the anti-money laundering (AML) regulations.
The tax authority brought in a rule in October 2020 that meant so-called ‘express’ trusts must be registered on an AML database, which will be public to parties such as financial firms. Previously, only trusts that paid tax had to be registered.
However, HMRC said it would only be issuing fines in cases where it could prove that failing to register or late registration had been deliberate.
A spokesperson for HMRC said: “The requirement to register with the Trust Registration Service is a new one for many trustees, and we anticipate some trustees will remain unaware of the obligation to register once the deadline has passed.”
Thousands could still face fines
Marilyn McKeever, a partner at London law firm BDB Pitmans, told City AM that while the new laws are aimed at preventing people from hiding money overseas, thousands of ordinary people could face fines.
The laws were introduced as part of an international crackdown on money laundering and are aimed at boosting transparency, she said.
McKeever added that simply taking out an insurance policy or buying a property could lead to a person becoming a trustee. “There are lots of other examples where it just wouldn’t occur to people,” she added.
“There hasn’t been much of a publicity campaign to raise awareness amongst the general public, meaning unaware people could get caught out.”
Those who fail to register trusts face initial fines of £100 and could face fines of up to £200 if they fail to pay the initial sum.
1m have already been caught out
The new rule caught out more than a million people who have carried out basic estate planning.
These include couples who have trust arrangements written into their wills, allowing their spouse a lifetime interest in their home before the property is passed onto their children.