It is apparent from my Victor Meldrew rants that I have certain misgivings regarding the introduction of the NRCGT return.
i) The duplication in reporting
As Maths and bd6759 have confirmed, where an individual has been issued with a self assessment return, it is not necessary to submit a capital gains tax calculation with the NRCGT return. I may be missing something here, but if HMRC are content for the reporting and any required tax payment to be made via the self assessment process, why is it still necessary for taxpayers to complete a ten page NRCGT return?
The return asks taxpayers to confirm:
- whether they are going to nominate one of the alternative methods of computation; and
- if claims for reliefs are going to be made.
To answer the above questions it may be necessary to prepare detailed calculations requiring information that may not be readily available to a taxpayer who is abroad, within the 30 day reporting period.
The layout of the form will not win too many design awards either with several sections headed:
“For funds and certain companies only”
“Ignore this section”
However, when you pass over those sections you subsequently notice they contain compulsory questions (*indicates required information).
HMRC already has a history of asking taxpayers for information they don’t require. Recent examples are the tax return service company question and questions regarding non-UK residence on the 2013/14 self assessment tax return.
As Keith Gordon stated in one of his articles:
“In short, the statutory basis for a personal tax return is limited to that information that enables an individual’s tax liability for the year to be calculated”.
With the above statement in mind, why is it compulsory to enter the telephone number of the taxpayer on the NRCGT return? Does HMRC really phone taxpayers overseas?
ii) Penalty regime
My main concern however, are the NRCGT return late filing penalties that are being levied on individuals who have previously always attempted to comply with their UK tax filing obligations. I’m sure if 100 expats were asked what they have to do within 30 days of conveying a UK property, the percentage answering, ”file a NRCGT return” would be quite small (certainly it appears the filing obligation has escaped the notice of some legal advisers).
Penalties for filing a NRCGT return late can quickly escalate to £1,600 even though in many cases there will be no CGT to pay. I could go into a bar, hit someone over the head with a bottle and probably get a smaller fine. Which action really is more serious?
The NRCGT return penalties are based on the self assessment tax return penalty regime. Under self assessment a taxpayer will become aware that their return is outstanding (if they didn’t already realise) as HMRC issue penalty notices to the taxpayer, but this does not happen with a NRCGT return penalty. The taxpayer just receives a demand for £1,600 with no prior warning from HMRC (not a great incentive to file a late return is it!).
I’m sure I recall watching an HMRC lady recently confirming that when MTD is introduced, HMRC will adopt a ‘softly softly’ approach regarding penalties. Well to my mind HMRC should:
- treat taxpayers due a NRCGT penalty in a similar manner-the tax system needs to be equitable (unless you are a premier league footballer)
- replace the existing penalty regime with something more proportionate.
I’m sorry for this further rant, but the penalties being charged for an innocent oversight are just crazy in my opinion.