Big fines for non UK residents in respect of late capital gains returns

The Issue

Since 6 April 2015 any disposal of UK residential property falls within the UK tax regime. There is now an additional reporting requirement for all non-resident owners who sell any UK residential property after this date. The legislation states that a non-resident capital gains tax return must be submitted to HMRC within 30 days of conveyance of each property even if there is no tax to pay or a loss was made. It is possible to defer the payment of any capital gains tax until the submission of the annual tax return otherwise payment must also be made within this 30 day period.

Even though this requirement has been in place for a while, we are seeing regular cases of it slipping through the cracks either because parties are ignorant of the obligation or think that somebody else is dealing with it. This is potentially a very costly mistake as a result of how late filing penalties are calculated being:

  1. £100 per return is applied if the return is one day late
  2. £10 per day penalty is charged once the return is three months late for up to a further 90 days
  3. 5% of tax payable or £300 if greater is applied if the return is over six months late
  4. A further 5% of tax payable or £300 if greater if the return is over 12 months late

 

Example

For example, if a company sold three properties in July 2015 at a loss but did not file any non-resident capital gains tax returns to HMRC until September 2016 this could give rise to penalties of over £4,500 even though no tax is payable.

Solicitors have made it clear that the completion of these forms does not fall within their remit. The onus is therefore on the non-resident individuals or fiduciaries to pass on the relevant information to their accountants or tax advisers in a timely manner so that these unnecessary penalties can be avoided.

 

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