The 30-day requirement was announced in the 2013 Autumn Statement and implemented in April 2015.
Sellers have to file a non-resident capital gains tax (NRCGT) return within 30 days of the disposal of a UK residential property. A return still has to be completed even if no CGT is payable.
Failure to notify HMRC within the specified time originally carried:
- an initial penalty of £100 ($135, €113) in all cases;
- plus a 5% charge of the tax due or £300 for returns over six months late;
- plus a 5% charge of the tax due or £300 for returns over 12 months late;
- plus a £10 daily penalty for returns filed between three and six months late.
According to the Society of Trust and Estate Practitioners (Step), this gave rise to a large number of complaints when HMRC tried to enforce the penalties.
As a result, the daily penalty was withdrawn, along with past penalties issued against late filers.
In mid-December, the First-Tier Tax Tribunal released decisions on two cases that centred on the late submission of NRCGT returns.
Both cited the case of Rachel McGreevy who resides in Australia and successfully overturned a £1,600 penalty for submitting an NRCGT a year after selling her UK property in 2015.
McGreevy said her understanding was that the CGT, which was nil, would be payable as part of her annual self-assessment. After discovering this was not the case, she completed the form and submitted it to HMRC, appealing the fine as “she had absolutely no idea” it was a requirement and had “received no previous advice to do this”.
The UK taxman rejected her appeal on the grounds that she had “no reasonable excuse”. It said it was McGreevy’s responsibility to ensure that an NRCGT return was submitted on time, as all the relevant information had been clearly publicised on the UK Government’s website.
McGreevy successfully appealed, with the tribunal judge determining in September 2017 that HMRC had not publicised the 30-day deadline widely enough, relying instead on the chancellor’s Autumn Statement and “an obscure document” on its website.
The judge stated: “I therefore consider that [Greevy] had a reasonable excuse for not filing a NRCGT return on time.”
Her success, however, has not meant that others have been as lucky, as two similar cases from December demonstrate.
Ignorance is not bliss
In one case, Mr Welland, who resides in Thailand, decided to sell three properties in the UK. He did not complete an NRCGT under the belief, like McGreevy, that he was to make the declaration in his annual self-assessment.
He claimed that it was only when he started to complete the self-assessment form that he became aware that the NRCGT had to be submitted within 30 days.
No CGT was due from the sale, as the profit was within his annual allowance.
However, after HMRC stripped out the daily penalties, Welland was left with a penalty of £1,800.
In a similar case, David and Jennifer Hesketh live in Singapore having been non-resident in the UK for many years. They sold a jointly-owned London property in December 2015 but did not file an NRCGT until January 2017.
Again, no CGT was payable on the sale of the property.
In January 2017, HMRC imposed a late filing penalty of £100 on both Heskeths, plus a £300 late filing charge each and £900 of daily penalties. After withdrawing the daily fines, the total penalty the couple faced was £800.
The same judge made both decisions and determined, having consulted the McGreevy ruling, that ignorance of the law was not a reasonable excuse for not complying with it.
The penalties were upheld, although Welland’s was reduced to £700 to reflect the quick succession in which he sold his properties. Had they been spaced apart, the judge said it was likely that he would have learned of his non-compliance and not made the same error with the subsequent sales.