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UK Capital Gains Tax for Non-UK Residents selling a UK Home

Ignorance of complicated rules may – or may not! – prevent a fine from HMRC.

Simon Warne, Partner, Private Clients
London buildings Georgian style
Some non-resident individuals and companies who sell UK residential property have to pay UK Capital Gains Tax.

Those affected by the rules have to file an additional tax return – an NRCGT return – to HMRC within 30 days, even if there isn’t any tax to pay.

This rule even applies to non-residents who already make regular tax returns and UK tax payments (including their liabilities for non-resident CGT) via self-assessment.

Some people have been fined £700 for not filing an NRCGT return, even though their tax liability has been nil, very small or has been paid normally through the self-assessment system.

Legal challenges

But a series of conflicting tribunal decisions have left it unclear whether not knowing about the rules is a reasonable excuse, and indicate that this area of tax law needs to be reviewed and tidied up.

  • In the cases of R McGreevy v HMRC [2017] UKFTT 690 (TC) and P Saunders v HMRC [2017] UKFTT 0765 (TC), First-tier Tribunal judges agreed with the taxpayer's appeals and quashed the filing penalties under the doctrine of reasonable excuse. The overseas taxpayers argued they were unaware of the changes in UK tax law, and HMRC's insistence that they should have been aware was dismissed because HMRC had not targeted the taxpayers with information about NRCGT despite them being on HMRC’s radar as a non-resident with UK income from property.
  • However in the cases of Hesketh v HMRC [2017] UKFTT 871 (TC) and then R Welland v HMRC [2017] UKFTT 870 (TC) judges upheld the view that HMRC's publication of the new law on its website was sufficient, and it was not reasonable for a taxpayer to say they were unaware.
  • In the case of Alan Jackson v HMRC [2018] UKFTT 0064 (TC) the tribunal accepted that ignorance was not a reasonable excuse, however in that case all penalties other than the initial late filing penalty of £100 were quashed because the taxpayer had been given no opportunity to correct his behaviour between the issuing of the penalties (they were all issued at once).  
  • In the Upper Tribunal case of Perrin v Revenue and Customs Commissioners [2018] UKUT 156 (TCC) it was decided despite there being some circumstances where ignorance of the law can be a defence, each case has to be viewed on its own merits.

This apparent inconsistency in tribunal decisions shows that each case depends on an individual's circumstances. The safest way to protect yourself against penalties is to discuss your particular case with your advisors at the earliest opportunity.

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Simon Warne
Simon Warne
Partner, Private Clients