Written by: Kate Aitchison

Kate Aitchison

Director, Private Client Tax

HMRC data may be open to mismatching risks

HMRC is now one of the major data collectors in the UK and acknowledges that it still has work to do in terms of making sure that its data is complete, correct and matched to the correct taxpayer. However, a serious problem with one source of data collection means that incorrect data is being acquired and processed by HMRC.

Introduced in 2018, the Trust Registration Service (‘TRS’) summarises the legal owner of assets and who receives the ultimate benefit. Taxable UK trusts register their trustees, beneficiaries and assets, and update in real time, so that the true beneficial owners of valuable UK assets can be matched and monitored by HMRC. 

HMRC’s online system for real-time updates was delayed until 2020, two years after the initial rollout. In 2021, the system was updated and broadened to include non-taxable trusts.

While the system can be cumbersome, there are more pressing concerns with the potential mismatching of data held. Key to this issue is that the TRS is separate to the tried and tested Self-Assessment system, where multiple users over multiple locations can access different client records at the same time. The TRS system does not have similar functionality, and although multiple users can login simultaneously, they default to the same client record. 

This means that users can be inadvertently switched into an incorrect client record partway through, which could lead to updating client records and submitting data for the incorrect client. For agents of multiple trusts there is a significant risk – particularly at busy times of the year – that incorrect client data will be inputted and matched by HMRC to non-linked taxpayers. 

Although HMRC is aware that there is an issue with the TRS system and has confirmed that it will be fixed, it has not yet committed to a timescale. With more non-taxable trusts falling within the filing requirements this year, the number of potentially affected trusts and taxpayers will also increase. The analysis of data is key to HMRC’s approach to find and tackle tax avoidance and where there are known weaknesses in its own systems, this needs to be addressed to manage its own risks, maintain taxpayer confidence, and avoid unnecessary enquiries.

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