The well known tax commentator Peter Vaines questioned the fairness of the penalties in his article below (my bold).
NR CGT Return Penalties
Some clarification would seem to be necessary regarding the obligations for submitting Non Residents Capital Gains Tax returns and the penalties for failing to do so.
It may be remembered that in the case of Patsy-Anne Saunders v HMRC TC 6173 (and in Rachel McGreevy v HMRC TC 6109) HMRC failed to impose penalties for the late submission of Non Residents CGT returns.
Patsy-Anne Saunders sold a UK residential property at a loss. She was not resident in the UK and although she was aware that capital gains tax can now be charged on non-residents who sell UK residential property at a profit, she did not know that it was necessary to submit a CGT return even if she made a loss. HMRC charged her a penalty of £1300.
The Tribunal said that she had no obligation to submit a Non-Residents CGT return at all – but even if she had, Miss Saunders would have had a reasonable excuse to relieve her from the penalty.
HMRC said she had no excuse, because:
non-resident individuals have an obligation to stay up to date with legislation in the UK.
Ignorance of the law is no excuse and she should have been aware of the changes effected by section 12ZB TMA 1970.
The obligation to file a Non Residents CGT return within 30 days of completion of the sale is not obscure or complex law.
The Tribunal rejected all these arguments in extraordinarily strong terms – including the words “claptrap” and “preposterous”.
The Tribunal even pointed to the fact that in their published materials on this subject, HMRC explained the requirements incorrectly – which rather supports the proposition that the law must be obscure or complex if HMRC did not get it right themselves.
An appeal would seem to be likely, but in the meantime, there has been a further decision from the FTT - Hesketh v HMRC TC 6266 - where the Tribunal upheld a penalty for the non submission of a NRCGT return, taking the view that the cases of Rachel McGreevy and Patsy-Anne Saunders were wrongly decided. This might be said to be further evidence that the law is obscure or complex if even Tribunal judges get it wrong.
It is difficult to know what the taxpayer (or non-taxpayer) is supposed to do when diligently trying to fulfil their tax obligations, when they are faced with these conflicting decisions. The imposition of penalties in such circumstances does nothing to enhance the public perception of the fairness of the tax system or of those who are responsible for its operation. Some clarification or a sensible practice statement would clearly be welcome.
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