Since April 2015, non-UK residents selling a UK residential property have been required to report the disposal to Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... within 30 days of completion and pay Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may... on this as appropriate, or run the risk of incurring substantial penalties. These new rules are usually refered to as Non-Resident Capital Gains Tax and this blogs looks at penalties which are imposed by HMRC for non-compliance.
See our full article on Non-Resident Capital Gains Tax here.
What are the consequences if you miss this deadline?
It will come as no surprise to learn that HMRC will penalise you if the return is not filed on time, with the level of penalties raised dependent upon how late the return is.
• An initial penalty of £100 in all cases;
• daily penalties of £10 for returns filed between 3 and 6 months late, subject to a maximum of £900 (but these are discretionary, see below!);
• a further penalty of 5% of the tax due, or £300 if greater, for returns filed more than 6 months late;
• a further penalty of 5% of the tax due, or £300 if greater, for returns filed more than 12 months late.
That’s a total of up to £1,600 (or £3,200 if the property was sold in joint names) for missing a filing deadline many people are unaware of.
Can the penalties be cancelled?
In spite of the penalties being disproportionate to any tax which may or may not be due, HMRC’s stance is unforgiving and will not entertain an appeal unless there is, what they consider to be, a reasonable excuse for failing to file on time.
A crumb of comfort?
However, we have recently seen a breakthrough in a number of our client cases and HMRC have accepted that daily penalties will not be applied, these have been removed and it is understood that HMRC will no longer issue daily penalties. The remaining late filing penalties will still be charged, but this mitigates the potential costs significantly.
Whilst this is positive, it does still leave a bitter taste in the mouth for clients who, quite understandably, were unaware of the filing requirement and were not advised of this by the solicitor dealing with the conveyancing work.
If you are a non-resident selling UK residential property we recommend you file on time, if you have failed to file your non-resident CGT return or have filed late and been penalised with daily penalties you also need to take action now and should contact us for further assistance.