NRCGT return

[etf]

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).

[someone]

Someone's find looks a bit of a gem.

Others did all the 'finding.' I merely extrapolated (perhaps beyond all reasonable limits)

[rbk123]

Why are similar cases brought to the FTT getting different results?
In all FTT cases I have been able to view, HMRC start their defence stating how late the return was filed and therefore the taxpayer was in breach of the legislation etc. If the judge also uses this as the starting point, I think the decision is more likely to go in favour of HMRC. HMRC are trying to get the judges attention away from how the failure to file occurred in the first instance. Judges who take the time to find out what caused the taxpayers ignorance of the change in the law will, and have, found that it was caused mainly by the lack of information, lack of publicity and very poor implementation by HMRC. It is also galling that unless you complete the return there is nothing in place to inform HMRC that a sale has taken place by someone residing overseas. Another failure of theirs. We should be allowed to take the 5th!
Quote for the case against us “HMRC submit there was extensive information available before and after the change of legislation.” In whose world??
Quote “HMRC contends that I had an obligation to stay up to date with legislation affecting my activities within the United Kingdom”. Not according to the judge in the decision summary, in our favour, that we have received.
Another quote referring to our repeated request for information under to FOI Act “An organisation, including HMRC can refuse requests for information under the FOI Act if the information is sensitive or the costs too high.” What can be sensitive about the reasons for over 700 penalties being cancelled by HMRC? It makes me wonder how many names would be recognisable if a list of those 700+ were published . It certainly implies one rule for one..... if you know what I mean!

[etf]

I think it is commendable that having slain the dragon, you are not walking away into the sunset to put your trotters up, but instead are continuing to fight for a fair outcome for others. Your insight into the process is also very helpful.

Unfortunately, if I listened to the story spun by Dastardly and Muttley, they would still have me believe that all taxpayers are receiving even-handed treatment i.e. a modern day equivalent of the Emperor's New Clothes. It is therefore reassuring to know that others feel the same way as me.

I am still waiting for HMRC to confirm who is responsible for ensuring the Taxpayers Charter is adhered to. I think it is illuminating that despite repeated requests they just blank me on what for any other organisation would surely be a very straightforward request. I suspect the reason why they are dragging their heels is that any responsible officer once presented with the available evidence would investigate in more detail. This would surely lead to an investigation of the 778 successful appeals and perhaps like a stack of cards HMRC's story collapses.

[LSH]

From the bottom of my heart thank you to each and every one of you for all the inputs on this thread. I would have given up long ago if not for the assistance on here.

It is with utter delight (and a bit of shock) that I can announce HMRC has decided to cancel the penalties and they say that my appeal is now treated as settled (as a one off 'strictly on this occasion' and 'without prejudice' under S54 of the Taxes Management Act 1970 though not sure what that is).

I took one last chance at going back as the 'review of decision' letter (which had upheld the original decision maker's decision) said 'if there are any other circumstances you think we should consider' or something along those lines. I used all the additional info I gleaned from the timeline regarding what had been published in advance of the law change, and made specific reference to the point on government intending 'those involved in the sale to facilitate'. I used Someone's argument on that point too as a means of excluding anyone else other than the solicitors.

My case was a little unusual as I could also prove that my property was under offer by early/mid March 2015 and therefore the lack of info before the law change was very pertinent to me (and might have been the reason they have accepted to cancel the fines as I could show that all the publicity prior to that had been targeted at advisors and not the general public). Everything stepped up somewhat when I got my MP involved (even just since it meant I could do everything on email instead of waiting around for 6 months for letters to arrive). If RBK had not advised going down that route, or advising that it wold be the MP for my old property location, I wouldn't have known. Never mind all the info and publications from ETF that I have absorbed, downloaded and read.

Anyway - thanks a lot once again! I can breathe again......somewhat stunned actually that common sense finally prevailed.

[etf]

LSH-that is brilliant news. Thanks for updating the thread.

[rbk123]

Congratulations LSH & well done! We are delighted for you and great that common sense is at last prevailing. Interesting HMRC says "Without prejudice"! Maybe they are finally losing so many FTT hearings and are giving up & dealing at a lower level with cases they know they can't win. You can relax now this debacle is finally over. We are still waiting for the full transcript of our successful FTT to reach us by snail mail. R&B

[LSH]

Thanks RBK and ETF

My last letter to them had 'flavours' of everyone's inputs and advice on here.

My thoughts are that they are either worried about your something specific in your case RBK (or maybe another as-yet unpublished one); and / or they are worried about the lack of info that was published before the law came in, even though government itself said it was be a 'significant' change (and the fact that this would present them in a bad light if in the wider, public domain); or the part about 'others involved in the sale facilitating the process; or that they are looking at the cost to the taxpayer of keep taking these cases to court which they are mainly losing.

But one thing is for certain - I would never have managed this on my own without all the excellent advice and inputs on this forum and for that I am so grateful. It is going to be very interesting to see how other cases continue from now really. Though I feel sorry for those who just accepted the fines and didn't appeal. I was very close to throwing in the towel myself at times too, to be honest.

[etf]

Despite these excellent results, I would still like to establish whether HMRC changed their policy at some point in time from accepting ignorance as an excuse to not accepting ignorance as an excuse. The evidence on this thread and the freedom of information statistics indicate this may have been the case. If my theory is proved, HMRC will clearly have treated taxpayers unfairly which is contrary to the Charter and the only remedy for this would be to cancel the penalties for those who claimed ignorance as an excuse but whose appeals were denied. Otherwise what is the point of having a Charter?

I still await a reply from HMRC's hierarchy to my request for the person who is responsible for ensuring HMRC adhere to the Taxpayers Charter (I've made repeated requests to no avail). My feeling is that by ignoring my request they are obstructing potential justice for the individuals who were fined where their circumstances were identical to those who had their penalties cancelled. Obstructing justice seems a recurring theme with:

i) HMRC unwilling to release data to detail how many of those 778 cases had penalties cancelled where ignorance was the reasonable excuse.

ii) Losing a recorded telephone conversation where a member of their staff lost their head and slammed the phone down because she (wrongly as later confirmed by the complaints manager) would not accept that I could initiate a complaint by telephone

iii) Advising me the NRCGT team cannot be contacted by email (see LSH's post suggesting this is not the case).

If anyone can see flaws in the above analysis please fire away.

[rbk123]

Please direct your questions to
jon.thompson@hmrc.gsi.gov.uk
Thank you.