HMRC will repay penalties for non-resident capital gains tax returns

The issue

From 6 April 2015, all non UK residents are required to report the disposal of any UK residential property to HMRC and pay capital gains tax where applicable. Tight deadlines apply as the disposal must be reported to HMRC within 30 days via an online form. There are differing rules for when the tax is due for payment.

As a result a significant number of these forms are being submitted late as solicitors are not advising their clients of this reporting requirement at the time the property is sold. This means that HMRC has been ‘raking’ in late filing penalties even though in most cases no capital gains tax is payable. This is due to the penalty regime for the late filing of returns as outlined below:

  • Initial £100 penalty – applies 31 days from the date of disposal
  • Once three months have passed the £10 per day penalties (for a maximum of 90 days) are incurred
  • Once six months have passed a further penalty of 5% of the tax due or £300 if greater is incurred
  • If the return is 12 months late another penalty is charged being the higher of 5% of the tax due or £300 if greater.

Using the above as a guide, the penalties for a return submitted more than 12 months late which gives rise to no capital gains tax will give rise to penalties of £1,600 when most non-residents were not even aware they had a reporting obligation. This seemed highly unfair to most. There is the ability to appeal the penalties although HMRC have been extremely reluctant to agree any appeals made to the late filing penalties until ………..


Penalty U-turn!

CIOT (The Chartered Institute of Tax) have been in discussions with HMRC following reports of substantial penalties being levied on unsuspecting non-residents. The main reason that they wanted the position to be reviewed was due to HMRC’s draconian attitude as well as the lack of publicity around the reporting requirement.

HMRC have remarkably changed their stance now in respect of the daily late filing penalties as set out below although the other penalties for late filing of returns will still apply:

“Following representations from a number of customers and agents HMRC have reviewed its position with regard to the £10 daily penalties. I can confirm that we no longer issue these penalties for late Non Resident Capital Gains Tax returns and past penalties will be withdrawn”

HMRC have confirmed the withdrawal of penalty notices relating to the £10 daily penalties and repayments of penalties already paid over to HMRC will occur automatically and no action is required by the taxpayer. However, to speed up the process, individual cases can be referred directly to HMRC.

If you have any queries do not hesitate to contact your normal Forbes Dawson contact.




Sign up for our newsletter

Interested in receiving the latest tax planning ideas?

Sign up to Tax Bites – our weekly update offering practical but effective tax saving tips.

Contact Us

You can use this form to request us to give you a call or if you prefer just leave us a message. Please be sure to leave us a contact number or email address for you and we will get back to you as soon as we can.

0161 927 9277


Fairbank House
Ashley Road
WA14 2DP