Penalty for late notification of sale of UK residential property by a non resident

NRCGT fine

Didn't find your answer?

My client has notified me and hence HMRC 8+ months late, of the sale of a UK residential property.  It should have gone in online within 30 days of completion of the sale.  The resultant penalty for the late notification is £1,300.  The post April 2015 gain is only £200 on which clearly there is no CGT liability.  To charge such a draconian fine to a compliant taxpayer, who assumed that he would send in the information on his 2016 tax return in the normal way, seems contrary to natural justice, especially as my client lives in Asia where there is unlikely to be much coverage in the media about UK non-resident tax.  Have other agents seen similar fines?  If so does anyone have any advice about how to formulate a reasonable excuse claim? 

Replies (17)

Please login or register to join the discussion.

By Tim Vane
23rd Aug 2016 19:24

Because "ignorance of the law is no excuse" then I don't see what claim you can possibly hope to make as a reasonable excuse.

As usual a client pays the price because they have carried out a significant transaction without discussing with their accountant.

I'd want to have a word with the solicitor that did the conveyancing, and perhaps get sight of the advice they gave the client in this regard. I suspect that the solicitor advised the client to seek professional advice re the tax implications and that the client ignored that advice. If so then my sympathy would be very limited.

Thanks (0)
avatar
By possep
24th Aug 2016 09:12

Are there any disposal costs that may have reduced the gain to nil? The return is to be made elective where there is no gain or loss (does this mean chargeable gain pre AE? If the gain can be reduced to nil it should solve the problem. Appeal.

https://ion.icaew.com/taxfaculty/b/weblog/posts/nonresidentcgtondisposal...

Thanks (0)
Replying to possep:
avatar
By Justin Bryant
24th Aug 2016 09:52

No, that only means ng/nl for H&W transfers etc.

Thanks (0)
avatar
By Justin Bryant
24th Aug 2016 09:50

I agree it's squarely the solicitor's fault. A request for a £1.3k credit note from them may be the simplest solution.

Thanks (0)
Replying to Justin Bryant:
By Duggimon
24th Aug 2016 10:42

I don't know who you're agreeing with, nobody said that. I would expect, as is customary in these matters, that the solicitor advised the client to seek professional tax advice as they were not qualified to provide it.

I suppose it may be the case that they did not in which case I would agree with you but in my experience solicitors are generally quite good at making sure they're not open to being sued.

Thanks (0)
Replying to Duggimon:
avatar
By Justin Bryant
24th Aug 2016 12:49

Obviously if the solicitor said that then it's squarely the client's problem if he did not get advice at the time & he should have nothing to complain about.

Thanks (0)
Replying to Duggimon:
avatar
By Igor Nankun
24th Aug 2016 12:54

I am happy to confirm that the supply of solicitors that are "not too bright" is a plentiful one.

Thanks (0)
avatar
By bernard michael
24th Aug 2016 10:17

Or as your client lives in Asia he could ignore the fine. What could/would HMRC do effectively do about it?

Thanks (0)
avatar
By billgilcom
07th Oct 2016 01:38

You say client assumed that he would enter it in his return for 2016 as normal. Clearly if the client was accustomed to make an annual NR tax return this would in my view constitute a reasonable excuse in that the gain would be returned with the annual tax return .... not an unreasonable excuse...
Hope that this helps
www.wamstaxltd.com

Thanks (0)
avatar
By billgilcom
07th Oct 2016 01:38

You say client assumed that he would enter it in his return for 2016 as normal. Clearly if the client was accustomed to make an annual NR tax return this would in my view constitute a reasonable excuse in that the gain would be returned with the annual tax return .... not an unreasonable excuse...
Hope that this helps
www.wamstaxltd.com

Thanks (0)
avatar
By akr129
07th Oct 2016 08:45

I also posted this query on the ICAEW tax faculty blog and have actioned the answer given there. In reality gain is zero (not £200). The £200 was calculated using the ready reckoner on the HMRC website which time apportions the gain. As the house had been owned for many years, time apportioning is bound to show that there is a gain (ie inflation), of which a very small part falls in the period April 2015 to October 2015 when the sale completed. Alternatively if the gain is worked out by comparing the actual value at April 2015 with proceeds when the sale was agreed in July we contend that there has been no appreciation in these 4 months, so the client can claim no gain no loss. In this case there is a clause in the 2016 Finance Act which removes the penalty for such disposals and backdates the provision to April 2015. I have appealed along these lines and await a response.

Thanks (0)
avatar
By Wanderer
22nd Dec 2016 19:41

Think you have misinterpreted the NG/NL argument. My reading is that only comes into play where there is NG/NL by virtue of the NG/NL provisions, not just because there happens to be no gain nor loss.

Justin Bryant has alluded to that above.

Thanks (0)
avatar
By akr129
30th Jan 2017 15:07

You are right. The no gain no loss has to be in the circumstance of a husband / wife transfer or some such, not just a gain that happens to be nil by reason of not selling the house for enough money to generate a gain in excess of costs and allowable deductions. I have received a letter from HMRC dated 30 January 2017 telling me that my appeal, dated 8 September 2016, is not accepted. It's taken nearly 5 months for them to reply. I understand from other contributors to this forum that HMRC are ruthless in their application of penalties so my client will need to pay up.

Thanks (0)
Replying to akr129:
By Ruddles
30th Jan 2017 15:55

akr129 wrote:
my client will need to pay up.

No they won't - I doubt that HMRC will go to the trouble of an extradition order to recoup £1.3k.

The penalties are pretty much unenforceable at the moment, which makes the legislation pointless. One solution (probably the only one) is to make the solicitor liable. Yeah, I'm sure that would be perfectly acceptable to the legal profession.

Thanks (0)
Red Leader
By Red Leader
30th Jan 2017 16:45

Appeal. HMRC sometimes rescind when the penalty is very out of line with the related tax bill.

Thanks (0)
avatar
By Justin Bryant
06th Jul 2017 10:30

Very interestingly HMRC are now, as a matter of policy, not charging the £10 daily penalty for late NRCGT returns (they are still charging the other late filing penalties) and are refunding cases where this has been paid. I am not entirely* sure on what basis HMRC can pick & choose the penalties it decides to collect, but it is a no-brainer not to argue with that and appeal and apply for refunds where necessary.

*These recent cases may explain this policy change, as HMRC seem to need to send the taxpayer advance notice etc. for these daily penalties to be enforceable.
http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC05814.html
http://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKFTT/TC/2017/TC0...(sudall)
http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j9886/TC05...

There are inconclusive comments on this prior notice requirement here (which has nearly half a million views - so this is clearly pretty topical) before the above case was published:

https://ion.icaew.com/taxfaculty/f/tax-news---forum/4755/nrcgt-penalty#p...

Edit: this has now been conclusively confirmed here: https://ion.icaew.com/taxfaculty/b/weblog/posts/late-nrcgt-returns-hmrc-...

Thanks (2)
avatar
By akr129
16th Oct 2017 16:59

My client has now received a refund of £900 daily penalties by not £400 fixed penalties. HMRC says it doesn't have discretion on the latter. The refund of the daily penalties is as a result of a review of representations arising from HMRC's customers and agents. So keep up the good work everyone who posted helpfully on this blog.

How churlish that they couldn't repay the whole penalty for a disposal so early in 2015/16!

Thanks (0)