A summary of the Scowcroft decision:
The First-tier Tribunal has held that a non-resident taxpayer had a reasonable excuse for failing to file a non-resident capital gains tax (NRCGT) return within 30 days of the disposal as it was not reasonable to expect him to know about the obligation and where he relied on a solicitor to advise him about his obligations as a taxpayer.
HMRC had argued that a reasonable taxpayer in this taxpayer's circumstances would have researched what was expected of him, and equipped himself with the relevant knowledge to enable him to comply with his tax obligations having consulted HMRC's website. The tribunal judge found that this was a "wholly unrealistic counsel of perfection". The taxpayer had no familiarity with the NRCGT rules, and absolutely no reason to be put on enquiry about them. HMRC's argument that ignorance of the law was no excuse was only relevant where a tax obligation was sufficiently well known and publicised to be regarded as a "water cooler" topic. This did not apply to the obligation to file an NRCGT return even where no taxable gain had been made. Therefore, it was objectively reasonable for the appellant to have been ignorant of the obligation in his circumstances. Although not basing his decision on this point, the judge felt that HMRC's policy of suspending late filing penalties for the first year and 30 days of the operation of NRCGT, to allow taxpayers and agents sufficient time to become familiar with the new rules, only strengthened the argument that ignorance of the new obligation was a reasonable excuse.
The judge also found that it was objectively reasonable for the taxpayer to expect that the residential conveyancing solicitor dealing with the sale, knowing that the vendor was living in New Zealand, would advise his client about any relevant tax obligation. Although the taxpayer had provided his accountant with information to complete a tax return, there had been no reason to contact his client at the time of the disposal. This meant that the accountant was not in a position to advise specifically about NRCGT.
The judge did not consider the point made in Saunders v HMRC [2017] UKFTT 765 (TC) (see Legal update, No obligation to file NRCGT return where loss made (First-tier Tribunal), that, on a strict reading of sections 12ZA and 12ZB of the Taxes Management Act 1971, a taxpayer who had made a loss on the disposal had no obligation to file an NRCGT return. This decision, along with the earlier decision (also made by Judge Richard Thomas) in McGreevy v HMRC [2017] UKFTT 690 (TC) (see Legal update, Non-UK resident's ignorance of new NRCGT return deadline was reasonable excuse (First-tier Tribunal)) shows a divergence of view among tribunal judges on whether ignorance of the law can be a reasonable excuse. The opposite view prevailed in Hesketh v HMRC [2017] UKFTT 871 (TC) and Welland v HMRC [2017] UKFTT 870 (TC) (see Legal update, Non-UK residents' ignorance of new NRCGT return deadline was not a reasonable excuse (First-tier Tribunal)).
Case: Scowcroft v HMRC [2018] UKFTT 295 (TC) (25 May 2018).
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