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HMRC Impose Strict Penalties for ‘ignorance’ over Non-Resident Capital Gains Tax

Recent First-tier Tax Tribunal cases have held that non-resident property owners cannot be excused from penalties through ignorance of the law, with HMRC standing firm over late filing penalties for Capital Gains Tax (CGT) returns.

Introduced in April 2015, non-residents must file a CGT return within 30 days of the disposal of a UK property, even if no tax is payable. However, many people have been unaware of the changes and have been charged penalties for failing to notify HMRC.

In fact, the penalties increase substantially over a short period of time and can result in non-residents being charged up to 10% of the tax due for returns filed over six or 12 months late.

Unsurprisingly, this has led to a growing number of complaints and HMRC originally charged daily penalties but have since decided to withdraw these for tax returns filed late.  The initial £100 penalty and 10% penalty of tax due still remain though.

Despite becoming more lenient with respect to the penalties being issued, HMRC have maintained a tough stance on non-resident CGT and many high-profile cases such as Hesketh v HMRC (2017 UKFTT 871 TC) and Welland v HMRC (2017 UKFTT 870 TC) reiterate this point.

In both cases, the taxpayer was unable to escape penalties by pleading ignorance with the judge claiming that ignorance of the law is not an excuse in civil cases. As a result, the penalties charged by HMRC were upheld.

However, in an alternative case, referred to as the McGreevy ruling (2017 UKFTT 0690 TC), it was argued that HMRC had not extensively publicised the 30-day deadline, allowing Mrs McGreevy to escape penalties totalling £1,600.

Although this highlights a lack of clarity over the information provided to taxpayers, the recent cases suggest that HMRC are not prepared to give up and will continue to impose strict penalties for the late submission of non-resident CGT returns.

Jack Biggs, Accounts Assistant

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Posted in: Blog, Tax