NRCGT return

[etf]

More negative NRCGT comment for HMRC in the viewpoint below:

HMRC’s taxpayer charter – worth the paper it’s written on?
Published on October 10, 2017
Director at PwC
In the most recent taxpayer survey of performance against HMRC’s taxpayer charter, the tax authority performs poorly on certain key criteria (see here for the charter and here for the survey). For example, 34% of individuals surveyed consider HMRC are inefficient and waste money, only 40% believe that HMRC ensure “customers” pay the correct amount of tax. Depressingly, only 35% believe HMRC apply penalties and sanctions equally (and this is 3% down on the previous year!)

Which brings me to the particularly egregious case of Rachel McGreevy v HMRC, heard in the first-tier Tribunal last month (link to case here). I encourage those with time to read the full transcript. it is a scathing indictment of HMRC who tried to bully a taxpayer into paying a substantial tax penalty which (it was held) was probably not even due in the first place, and if it had been due, should have been reduced by HMRC to nil at their discretion on the basis Ms McGreevy had a reasonable excuse for filing a late tax return.

I am frankly appalled that HMRC was prepared to let this case go to the tribunal. I would suggest that this case demonstrates that HMRC, in many cases (this is not the only example), are not even paying lip service to the charter they signed up to.

The facts of the case can be stated briefly as follows:-

· Ms McGreevy owned a property which qualified as her principal residence and was therefore exempt from UK capital gains tax.

· She moved to Australia and subsequently sold the property. She reported the sale on her UK tax return as exempt. In doing so, she discovered that under a newly introduced rule, she was also required to file a “non-resident capital gains tax” (NRCGT) return within 30 days of the sale. She subsequently completed and filed a NRCGT return.

· HMRC then imposed a late filing penalty of £1600.

· Ms McGreevy appeal the penalty on the basis that she had been unaware of the requirement to file a NRCGT return, but had complied with the requirement as soon as she became aware of it.

· HMRC had a discretion to reduce the penalty if Ms McGreevy had a “reasonable excuse”.

· HMRC’s response was that she had no reasonable excuse. The reason for this was that she had “an obligation to stay up-to-date with legislation” and that “ignorance of the law is not considered a reasonable excuse”.

It may seem somewhat disproportionate that HMRC has the ability to charge such a high penalty when no tax is ultimately due. However that is the law and HMRC does have discretion to reduce it.

The judge made the following findings:-

· HMRC failed to establish that the capital gain arose after the NRCGT rules took effect (it is somewhat ironic that non-tax literate taxpayers are expected to take “reasonable care” under the taxpayer's charter, whilst HMRC tax specialists failed to take reasonable care when preparing the “statement of case” for the tribunal). Therefore HMRC failed to establish that a penalty was properly due.

· HMRC failed to follow the correct procedure for charging daily penalties. They should have notified her before the daily penalties started to accrue, but instead notified her after the event.

· HMRC failed to properly consider her claim for a penalty reduction on the basis she had a “reasonable excuse”.

In the judge's words, “the arguments advanced by HMRC about knowledge of the law are little short of preposterous. To say that information about NRCGT returns is “well within the public domain”… is also claptrap… there is a serious deficiency exhibited here in common sense, proportion and an ability to consider the position of what HMRC calls its customers”.

Paragraphs 155 and onwards are well worth reading, if not least for a bit of light entertainment.

I wonder how many other “customers” HMRC have hit with similar unfair penalties and who, unlike the courageous Ms Greevy, have simply paid up.

[etf]

Hi LSH,

Thank you for your update.

If you receive a reply from HMRC to your appeal before 2 1/2 months have elapsed, I will report you for receiving favourable treatment

The front page of the Patsy-Anne Saunders judgement suggests the appeal was determined without a hearing. I've never attended a tribunal, but others may be able to confirm that P-A S did not have to travel from Saudi Arabia to achieve this result.

KR

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[rbk123]

We have sent our appeal the first tier Tribunal. We had a polite email request from them for further documentation in the form of our correspondence with and from HMRC in respect of our apoeals fir tge Tribunal''s consideration. We duly scanned and emailed 15 documents the sane day. We will keep you posted as to how we get on.

[LSH]

Thanks a lot RBK for your update. Do you mind me asking what type of documentation it was that you provided to the tribunal (meaning, what were the type of things you'd already shared with HMRC prior to that)? Thus far I have only written them a letter (of appeal) to respond to their first one to me informing me of being fined and my right to appeal (but it was received very late). I didn't provide any evidence as such in that letter - just stated the facts (re no profit or loss on the property and not having been notified of a change in law by the conveyencer and my intention to file as part of my self assessment that year).

I feel kind of in limbo just waiting to see when and if they respond and I'm not sure if I should be doing anything in the meantime (the letter will probably take many weeks to arrive here and could even be months - I have waited up to 6 months for things to arrive before. That is also assuming they write a reply and that it does get here). But thus far that basic appeal letter i's all I have sent. I know that it was mentioned about contacting my MP and emailing the head of HMRC. I haven't done that yet as I wasn't sure if I should try to wait for the first response back to my initial appeal (in the event that they might take pity on me and it doesn't go further).

But any advice you could offer on 'the process' would be most appreciated. I was told when I called the helpline originally that this was not something that could be done online anyway so I haven't followed my first letter with any email correspondence to them yet, but would if it might help.

Many thanks in advance.

[rbk123]

Hi LSH

You are probably in for the long haul! As per Paragraph 9 of Leaflet T242 First Tier Tribunal Tax Chamber "Making an appeal" we did everything we could with HMRC to resolve the issue to no avail and HMRC told us we had to go to the First Tier Tribunal . We completed the form available online for our appeal to the First Tier Tribunal and attached a copy of our initial appeals, HMRC''s rejections and our request for clarification on their second rejection given that it contained factual errors. The Tribunal then came back and asked for copies of correspondence referred to in our request for clarification so we have scanned and sent them virtually all of our correspondence to and from HMRC for their consideration of our case.
I would still suggest you contact your MP by email and request they ask a question in the house regarding late filing penalties on NRCGT. Given that, like here, snail mail can take weeks if not months to reach you, I would suggest you email your appeal to Jon Thompson. HMRC are surprisingly reluctant to use email; initially we did everything by post as we thought there was no other option often only having days to respond given they only allow 30 days. We found how to contact by email from the TaxationHell website and this is how we have communicated since always via Jon Thompson who passes it to one of his staff to deal with.
Hope this helps but, if you have any other questions, please let me know.

[LSH]

Thanks so much RBK - greatly appreciated. I will do that. Utterly exhausting though (and just before Christmas too!). I'll try and get something emailed off to both the MP of my last address there and to Jon Thompson some time this week. I'll say the length of time anything takes to reach the UK then reach here is also a factor in that and in contacting them. Thank goodness there is this forum to help support each other. The worry is still dreadful though. All the best and have a good Christmas and New Year.

[bd6759]

Further to my earlier posts, I've received evidence which suggests HMRC are proceeding down the path of ignoring the McGreevy case altogether as some had previously predicted.

As they are well within their rights to do. Other Judges are not swayed by his reasoning either. Judge Mosedale states quite plainly that his reasoning was wrong.

http://www.bailii.org/uk/cases/UKFTT/TC ... 06265.html

[etf]

I've only skimmed this judgement, but it appears the common sense approach adopted by the judges in the first two cases, has been discarded by Judge Mosedale.

If her statement below is true, why did HMRC waste taxpayers' money paying Moira Stewart to flag self assessment? Should we approach Moira and ask for a refund of her fee?

Tax law as a whole is enormously voluminous and changes very regularly. It must be impossible for HMRC to identify and notify every possibly affected taxpayer of every possibly relevant change in the law and if they were to attempt to do so, one can imagine few taxpayers would read the mountain of letters sent to them by HMRC on a regular basis.

But it can’t be looked at as a one off: if HMRC were obliged to warn non-resident landlords of this change, it would follow that HMRC have an obligation to individually warn all potentially affected taxpayers (who can be identified) of all potentially relevant changes. Yet Parliament cannot have intended to give HMRC such an onerous (not to mention expensive) duty. On the contrary, Parliament must expect citizens to be proactive in taking responsibility for ensuring they obey the law: otherwise few laws would be obeyed. So while HMRC might have a legal duty to publish significant changes on their website, I do not think it was actually unlawful for HMRC to fail to write to all non-resident landlords individually. Therefore, I do not consider that HMRC were in breach of any duty in failing to write to Mr Welland to warn him of the new NRCGT reporting requireme

If the idea of writing to taxpayers to advise them of a new filing requirement is not within HMRC's remit, why have they belatedly been doing that? Presumably, because it is what a sensible department should do.

Similarly, if Judge Mosedale had read my opening post on this thread, she would perhaps have appreciated that even HMRC's specialist technical staff didn't fully understand this filing requirement. Indeed, if this filing requirement is so easy to identify (see comment below), why have around one third of NRCGT returns been filed late...presumably nearly all of these individuals were legally represented when selling their properties.

In any event, I do not agree with McGreevy that the law requiring non-residents to make returns within 30 days of sale to be so complex that they cannot be expected to understand it.


HMRC may have won this battle, but if they continue to operate in this manner, in my opinion, they will ultimately lose the war. Please Lee, complete your trilogy of articles on this subject and dissect the lack of common sense contained in this judgement. I was really impressed by the effort Judge Thomas had gone to research this subject matter...i.e. searching on the internet,trying to access HMRC guidance etc. My opinion of an outdated judiciary was altered; only for this judgement to take me back to an Ivory Tower.

KR

etf

PS this judgement surely demonstrates the system is broken...presumably if you go to a tribunal and get Judge Thomas or Judge Connell you'll win, but get Judge Mosedale and you'll lose. Does anyone know when Judge Mosedale takes her holidays?

[bd6759]

I am told that in Edinburgh, the City Coucil have imposed a 20mph speed limit. The Police are responsible for enforcing this. As far as I am aware the police have not written to the registered keepers of vehicles within the city limits to advise them of this. Maybe anyone who does get caught exceeding the speed limit will have a reasonable excuse because they were not specifically told of the change.

Thomas got the headlines with McGreevey because of its style rather than its substance. His interpretation of the law was wrong and his reasoning was flawed.

All these appeals fall on whether there was a reasonable excuse. That is a question of fact which cannot be readily be challenged at the Upper Tier. So like all justice, in whatever court, it depends on the skill of your advocate and the interpretation of the Judge.

[etf]

I think we will probably have to agree to disagree on this topic.

I would like common sense to prevail. When you find one third of all people who have filed these returns were late in doing so (even though most have probably filed annual tax returns on time for many years) and they were being hit with £1,600 fines, something is not quite right. Indeed, HMRC recognised this following pressure from various parties when they waived the £900 daily penalties. In my opinion, they should either have stuck to the full penalties or cancelled all penalties...the current situation is a fudge.

Judge Thomas' viewpoint that the taxpayer had a reasonable excuse is shared by perhaps the best known expatriate tax practitioner in the country and many others as has already been detailed on this forum thread.

As for Edinburgh, I'm sure there would have been plenty of signs warning of the 20 mph speed limit (not just a couple of tweets).

KR

etf

PS to date no individual has used the excuse that they didn't like to lie to complete the NRCGT return. As every individual who has completed the return has had to pretend they are a company/fund to be able to complete the return, perhaps this is the next option if we are to live in a world devoid of common sense.