NRCGT return

[LSH]

Hi everyone

Just a quick update - my MP intervened which meant I got a quicker response back from HMRC (just received by email today). However, the reviewer upheld the original decision - they do not believe I have a reasonable excuse nor do they assert there are any special circumstances. In the meantime, in case it assists anyone, this is a (what I assume to be 'official') timeline they provided in their correspondence back to me today:


5 December 2013 — Autumn Statement 2013 — The Government announces their intention to introduce CGT on gains by non-residents disposing of UK residential property from April 2015 and to consult in 2014

28 March 2014 — Consultation document published on GOV.UK

27 November 2014 — The Government publish their response to consultation feedback on GOV.UK

10 December 2014 — Tax Information and Impact Note published on GOV.UK

23 March 2015 —FAQs published on GOV.UK

24 March 2015 —Agent Update 46

6 April 2015 —Guidance published on GOV.UK

21 May 2015 —Agent Update 47

2 June 2015 —HMRC Twitter announcements made once a week for four weeks with links to online guidance

17 November 2015 — Guidance on GOV.UK revised following customer feedback

15 November 2015 —Agent Update 51


It makes interesting reading - particularly as there was almost nothing released in advance of the law change other than the consultation documents - and as if lay people are meant to be reading or guided by those. Also - much of the 'publicity' has been via 'agent updates' - which I assume are for the benefit of tax agents. Again - it is reasonable for HMRC to thin that lay people would be reading these and finding the information from them?? Not everyone has the luxury of a tax agent or adviser to assist them. I certainly didn't.

In particular, at the point in time when my property was on the market (Feb 2015) and under offer (early March 2015) there had been no guidance published at all (and virtually no documents other than the consultations). They say they released 'FAQs' on 23 March 2015 but still no guidance - despite the fact that the law was coming out just 2 weeks later. I would say that it is NOT reasonable for HMRC to expect someone who checked in Feb/early March 2015 and found nothing indicating that the law and requirements would change just a couple of weeks later, nor any guidance, to then keep checking just a few weeks later in June 2015 when the property sold to the same person it was under offer to in early March when I checked! Nothing changed at all between the offer being accepted and when it sold OTHER than the law had changed and they belatedly released some FAQs and guidance. However, that was NOT online when I accepted the offer just weeks before. Sadly they think otherwise though and think it entirely reasonable that a lay person would keep checking their website on the offchance that something already checked would change just weeks later without warning. (Or that everyone would be following them on Twitter for goodness sake!).

The whole situation is very stressful and feels desperately unfair. For what it is worth - they have also outlined that reliance on a third party is not a reasonable excuse in my letter (I asserted that the conveyancer should have alerted me to the requirement to file, even if they did not have an obligation to do so on my behalf). Let's hope I get a bit more understanding at FTT.

[etf]

Thank you for your update. This is useful information for others in the same situation.

You just have to read my opening post on this thread (assuming I did not make it up) to establish that some time into the process, even some of HMRC's specialist CGT staff were struggling to get to grips with NRCGT.

Judge Thomas, clearly an intelligent well-read individual, put himself into the position of Joe Bloggs the taxpayer and tried to find out about this filing requirement when presiding over his first NRCGT case. He admitted he struggled.

Three years after the introduction of this filing requirement, 44% of NRCGT returns were being filed late.

It is a shame HMRC cannot absorb some of the above information and act reasonably.

As soon as a tribunal judge asks HMRC to justify why 778 appeals were allowed, I suspect we will discover they did initially allow ignorance as an excuse and a web of deceit will be exposed. Until that happens, the reliance on an adviser excuse seems the best way to go (it was always thus according to the outstanding expatriate adviser who gave his input before the 1st tribunal case).

Finally, yes dealing with HMRC is stressful and perhaps ought to carry a Government health warning. Tax work contributed to the death of my first boss and I too in the post NRCGT period have suffered a serious health event (it is difficult not to become like Victor Meldrew when one tax office loses three copies of the same letter...the 3rd sent by registered post...on that occasion my animated discussion lead to them finding the first copy...to cap it off someone was made a Dame for this outstanding public service...unbelievable). I'm hoping history does not repeat itself.

Good luck with your fight and please continue to update this thread to help others.

[rbk123]

Hi LSH
We wish you well with your appeal. In ours we used as much information as we could find to counter HMRCs arguments and aimed to negate arguments before they arose. The posts on this forum have some good info and read previous case histories.
HMRC seem to major on whether you have a "reasonable excuse" or not. They know the FTT won't rule on fairness.
The timeline they sent you is the same as the one we got from Jon Thompson via our MP. You will no doubt have noticed that 80% of HMRCs "External Guidance" was aimed at tax advisers etc through such communications as Agent Updates. 80% of those targeted by HMRCs External Guidance were not subject to NRCGT and would never have been held to account for not knowing. The only chance you had of becoming aware of a new filing requirement was through the autumn statement or via a tweet. HMRC say the information was available on line on 6 April 2015. Did they ever direct you towards that or did they expect some sort of osmosis to take place? How easy was it to find the relevant information on the website? According to Judge Thomas it wasn't. In our case HMRC told us that we should have known because the info was in Agent update 51. Why would ordinary people be aware of such publications or know where to find them? This update come out 4 months after the sale of our property.
HMRC state that they removed the daily penalties after consultations with representatives. The truth is the daily penalties were improperly imposed. I assume that you did not have a chance to correct the situation after your initial penalty of £100 because HMRC did not inform you of the imposed penalty. Is it correct that further penalties can be applied without you being notified? See Jackson v HMRC TC/2015/05341, pages 11 & 12.
HMRC states "Ignorance of the law cannot be a reasonable excuse as this would mean those people who choose to remain in ignorance of the law would be benefitting over those who knew the law and were compliant". How can one choose to be ignorant of the law? Surely one has to know what one is choosing to be ignorant of thus negating the argument.
We used this as part of our appeal. The judge also addressed the point made in pldazzles post of Mon Apr 23 2018. A person has an obligation to comply with the law but that law does not oblige a person to stay up to date.
It is factual that HMRC has cancelled penalties imposed for late filing of NRCGT returns where ignorance of the process is the reasonable excuse given by the customer and accepted by HMRC. HMRC are failing to treat all of their customers equally.
We raised the point you also raise in paragraph 3 of your Jun 22 post in our appeal.
We have yet to hear the reason behind the requirement for an extra form. Sir Humphrey would be proud of this!
If we can be of any further assistance please just ask.
As soon as we receive, through the post, the full transcript of our case we will post the case reference on this Forum so others can access it.

Kind regards

[LSH]

Thanks RBK - this is indeed most helpful. And I look forward to reading the court finding document too when it becomes available.

Great point about 'fairness' - I will move away from that then and concentrate on the 'reasonableness' of my actions. I absolutely believe I was reasonable to check when the offer was accepted in early March and not finding anything about any imminent law change to think this would also be the case when if sold a few weeks after that to the same person. I don't think anyone would then keep going back to the website on the offchance it (or the law!) had changed - when nothing had been publicised about that change. From now getting their timeline, I can see this definitely is the case. (I assumed it before not having seen anything on their website when I looked, but now I see for sure that the only thing that had been published at that point was the consultation docs and then some "Tax Information and Impact Note published on GOV.UK" whatever that was).

And yes - you are spot on - I noted immediately that most of those external communications on their timeline referred to tax agents and / or consultation documents. As if normal taxpayers would be getting information from them! Never mind the reliance on Twitter. I didn't even have an account then (even now I never use it). Furthermore - I wouldn't have thought really that the demographic for most people affected by this law change would even have accounts on Twitter, never mind following HRMC!).

I raised the point in my letters to them that I wasn't permitted the chance to learn from my mistakes given that I received the £100 + £300 + £300 all at once (whereas for SA you'd be immediately notified of the initial penalty and would only continue to be penalised if you further delayed). But it also fell on deaf ears.

Without a doubt they are treating people differently and I will also mention that in the next step. The fact that they apparently didn't pursue or fine penalties in the first 13 months demonstrates that. It's a nonsense. If I wasn't aware of it at the point of sale (as they had not publicised anything in the lead up when I checked), why would I miraculously be aware of it in May 2016 almost a year after I sold the property?! Surely the date should have been set to the first SA deadline following the law change given that it's that point that most cases would be captured! I am asking myself if the reason they had the 'soft touch' start anyway, is since they know they had inadequately informed taxpayers of any changes. If that is the case - why again did they limit it to May 2016?

Interesting point regarding 'ignorance of the law' and about having to comply with it but not necessarily having to be up to date. I will research that.

In the meantime, I wonder what the obligations are on HMRC to facilitate taxpayers in complying with the law. For example, what obligations exist for them to properly publicise and provide guidance in advance of any law change etc? Does anyone on here know anything about that? I wonder also whether the filing / return was available immediately following April 2015 for example. In my humble opinion it would not have been overly burdensome on HMRC to include something on the prior SA filing for non-residents to alert them to this. There have been a few comments in the rulings saying something along the lines of 'HMRC can't be expected to individually notify all tax payers of law changes that might affect them'. I understand that perfectly. But clearly when there was such a significant change to the requirements, and that it would affect only non-residents - then surely it would have been a 'quick win' to target those people who had already just filed a non-resident form in SA? Of course it would not capture everyone (and in some cases those non-residents may have now returned to the UK so it would be irrelevant), however, it would have been a quick win and a large part of the affected population could have been captured. It could even have been as easy as a notice in the prior year filing itself (if trying to access a database and sending an email would be too much trouble!).

Anyway - thanks for all your help. I will also keep everyone posted.

[LSH]

Hi all

Sorry for hogging the thread but I wanted to include some links and further comments in case it assists anyone reading - if nothing else it might prevent you having to spend hours sourcing these as I have just done. I've found links to the 'publications' that HMRC included on their 'timeline' which I referred to a couple of posts up:

Original consultation - March 2014 - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/298759/CGT_non-residents_condoc.pdf

Summary responses to consultation - November 2014 - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/380397/Implementing_a_capital_gains_tax_charge_on_non_residents_disposing_of_UK_residential_property-_summary_of_responses_FINAL.pdf

Tax and information note - December 2014 - http://webarchive.nationalarchives.gov.uk/20170605200730/https://www.gov.uk/government/publications/capital-gains-tax-non-residents-and-uk-property

FAQs - March 2015 - https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/413988/capital-gains-tax-non-uk-res.pdf

Agent update 46 (now withdrawn) - March 2015 - https://www.gov.uk/government/publications/agent-update-issue-46
Agent update 47 (now withdrawn) - May 2015 - https://www.gov.uk/government/publications/agent-update-issue-47
Agent update 51 - Nov2015 : https://www.gov.uk/government/publications/agent-update-issue-51

My observations and opinions on these are as follows:
a) The consultation doc and responses are typically for people involved in the industry. Normal taxpayers would not be looking to such documents for guidance usually (nor should the be expected to)

b) The Response to the consultation doc nevertheless confirms what others have mentioned on this forum - i.e. that many (no doubt qualified and experienced!!) respondents felt it would be unworkable to have a filing requirement of 30 days and thought the SA timeframe would be more reasonable (section 7.18)

c) In the government's response to that they state "There will be no obligation on those involved in the transaction to collect tax due, but the government expects that it is likely they will facilitate the process"!! So the fact that government actively anticipated that 'those [advisors] involved in the transaction' would 'facilitate the process' seems to go against HMRC's assertion that it is not a defence to have relied on a lawyer informing us of the obligation to file when they knew we were non-residents (even if they were not obligated to file or pay tax on our behalf) (section 7.22)

d) In that same report is states "Further information and guidance will be published in due course" (section 7.27) - however it is not clear when this was further info and guidance was released. Following HMRC's own timeline, the only info released was the Dec 2014 Tax Info note (which I refer to in the next point) plus some FAQs in late March plus an agent update. But what about normal taxpayers without Agents??! All other information was arising AFTER the law came into force

e) The tax note released in December 2014 is most interesting. I cannot find ANYWHERE where it states there will be a filing requirement within 30 days for individuals. In fact, it would lead the reader to believe that all matters would be settled at self assessment if they were in the SA bracket. "Provisions will make clear that the CGT charge will be due to be paid within 30 days of the property being conveyed, unless the person has a current self-assessment record with HM Revenue & Customs (HMRC) when payment will be at the normal due date for the tax year in which the disposal is made". It does make reference to a 30 day filing requirement for businesses BUT again it removes that if the business is in the SA bracket. "Impact on business including civil society organisations: There will be additional administrative burdens each time a non-resident business makes a disposal of a property – they will need to complete a new return and pay within 30 days unless they already complete self–assessment returns for other reasons"

f) All the Agent updates specify on the HMRC website that they are "Guidance and news for tax agents and advisers". In fact - within each document HMRC have used the tagline "Agents and HMRC working together". Clearly the purpose of these updates are NOT for guiding the general public. I believe that therefore negates entirely HMRC's use of these as 'general publications' re NRCGT in their timeline. What about normal taxpayers who don't have the luxury of an agent for goodness sake?

g)Even assuming a lay person thought it pertinent to read 'Agent update 46' just before the law changed - the only link there went back to the December 2014 Tax info note (which as I have mentioned in point e, did not refer to any need whatsoever to file a return for individuals or even business if they were in the SA system.

h) It seems to me that the only guidance published prior to the law change was therefore the FAQs in March 2015 (which I only found now from searching specific terms including "FAQs" and relevant dates). How anyone was supposed to find that prior to the law change is beyond me. (And bearing in mind that it was only published a week or 2 before that change). It also begs the question WHO in the F part of FAQ was frequently asking those questions??!! Was it tax agents? Again - what about those tax payers who cannot afford the luxury of tax advisors (who might never have had any income higher than the personal allowance?!)

So that marks the end of my current findings. Hope this is helpful to anyone.

[someone]

c) In the government's response to that they state "There will be no obligation on those involved in the transaction to collect tax due, but the government expects that it is likely they will facilitate the process"!! So the fact that government actively anticipated that 'those [advisors] involved in the transaction' would 'facilitate the process' seems to go against HMRC's assertion that it is not a defence to have relied on a lawyer informing us of the obligation to file when they knew we were non-residents (even if they were not obligated to file or pay tax on our behalf) (section 7.22)

I know nothing but I think this is a very, very strong argument. AIUI, judges are supposed to interpret the law based on what the will of parliament was.

Case law has established that failure of an advisor can be a reasonable excuse. But there seems to be a sticking point where conveyancers aren't tax advisors and so their failure to highlight the filing requirement isn't an excuse. (IMO they aren't giving tax advice, they're giving advice on property law and the requirement to fill the form is property law. What to put on it is tax advice)

So the next question would be 'did the government expect that every non-resident would appoint a tax advisor?' I would suggest that those with no tax to pay, or with existing advisors who would 'facilitate the payment of the tax when the SA was done', the government cannot have been imagining that the non-resident would additionally find another advisor whose only role would be to say 'fill in this form within 30 days' and they must have been imagining that the existing people in the sale process would highlight the filing requirement.

But clearly I don't see things as the Judges do. It is hard to separate feelings of fairness from understanding of the law. If the parliament makes an unfair (but legal) law then the route to change it is at the ballot box (but there are so few people affected by this law that in practice that is a non-starter) or via a perverse jury verdict (is that possible in tax cases?) OTOH, I would hope the judges go out of their way to interpret 'unfair' law as reasonably as possible (unless, of course, it is obvious that the intent of parliament was to be unfair rather than just the effect)

Parliament could have just imposed a minimum 1000 tax on all NRCGT calculations. But they didn't. IMO, the intent of the 30 day deadline is to collect the tax from the people with no other connection to the UK before they disappear. Most of the cases I've seen have been people late filing when they realise when they do their SA. It would be interesting to know how many penalties have been charged (and how many collected) on people with no other connection to the tax system.

If you were a tax advisor in Outer Mongolia and you discovered your client had sold a UK property, there was no tax due, and they never intend to visit the UK again, would you tell them to fess up and pay the fine or just keep schtum?

[rbk123]

Hi All. "Someone" is absolutely right with their comments in the last few paragraphs of their post.
For those interested in what was in the Agent updates mentioned by LSH, here it is,

"Capital Gains Tax
Capital Gains Tax for non-residents - sales and disposals of UK residential property
From 6 April 2015 if your clients are not resident in the UK and sell or dispose of a UK residential property they will need to let HMRC know within 30 days of doing so and may have to pay some capital gains tax (CGT) on the gains. This change will affect a range of non-resident customers."

This is copied from Agent update 46, and I believe updates 47 and 51 are identical. These few lines were part of a bulletin containing 14 pages and, if you take all 3 into account, equate to 30%the "extensive publicity" referred to by HMRC who expected the ordinary taxpayer who would be affected by NRCGT to find and act on this. How absurd is that!?!

This is what I believe happened : in the consultation documents, HMRC expected the conveyancers/solicitors, handling the property sale, to facilitate the process of NRCGT reporting, in the same way stamp duty etc is dealt with but knowing they could be held liable for late returns, conveyancers/solicitors refused to be involved (and who could blame them!) At this time, HMRC were pushing out their Agent Updates and, once they realised the legal teams were not going to facilitate triggering the process, they were too close to the date of the introduction of NRCGT and couldn't or wouldn't amend their rollout programme and hence failed to take the action required to let those who would be affected by NRCGT know the process they had chosen to introduce. In a nutshell, press on regardless. A large number of returns were late because of people's lack of information and knowledge of this new procedure so HMRC then applied penalties which were not designed for this situation eg if you fail to send your SA in on time, you are fined and advised, in writing, further penalties will be applied if you do not comply. In their "press on regardless" attitude, HMRC also failed to put ANY system in place so they would be notified of a property being sold by someone living overseas and, in doing so, allowed the very people they wanted to catch ie non-UK citizens to avoid any tax liability. For those with an established relationship with HMRC via SA there was absolutely no need to bring in a "report within 30 days of disposal" system. These people are now being punished heavily for their honesty and HMRC's failure. The arrogance and incompetence of HMRC's management such as Jon Thompson and Chris Cargan is beyond belief.

Some FTT Judges and HMRC claim it is unreasonable to expect HMRC to contact those who are affected by NRCGT individually but we have proof this is exactly what they have done in the past when changes have been coming in.

Finally, this whole matter needs an inquiry into HMRC's behaviour as to how all this came about; HMRC will not change by the ballot box. Judges don't seem to have an in-depth grasp of what has gone on and surely, it is time for a judicial review or HMRC's auditors (they do have auditors don't they?) to do their job and investigate.

[LSH]

Thank you Someone and thanks again RBK for your continued inputs.

Someone - I absolutely love your analysis on what government's intentions were re the professionals. Clearly they would NOT expect every non-resident to be advised by an agent, especially when their incomes involved are normally so low (below personal allowance for example). So it would definitely follow that they intended for the lawyers to flag this up at the point of sale in order to 'facilitate the process'.

And RBK - I agree with your conclusions totally too. I am sure that it must have been evident very quickly that very few filings were being submitted in the early days and that the methods of 'publicising' they were using were not effective. Maybe that is why the 'twitter' messages went out later in June (and if you look at them, they have each only been retweeted on average 10 times). Laughable. The cynic in my says that HMRC was thinking "ooops we've really dropped the ball here. None of those lawyers seem to be informing people like we thought they would. And look, we've only really published agent updates so far. Let's release something more 'in the public domain' to cover our backs". It looks like they are doing nothing to address this huge issue.

In the meantime, I am trying to formulate my case and in doing so I may try some FOI requests. Never having done this before - anyone that can offer me some advice please chime in. I have no idea if the things I am thinking of asking are far too onerous (though I wouldn't have thought so for most of them - surely they should have these stats at the push of a button!). Here are some of the things that I am thinking of asking:

a) Number of returns filed on a month-by-month basis since April 2015
b) Number of those returns in a) that were late (again each month since April 2015)
c) Penalties levied on a month by month basis (volume and value)
d) Number of appeals received on a month by month basis
e) Penalties cancelled by HMRC on a month by month basis (volume and value)

Regarding all these - I am thinking that those sort of stats would be able to demonstrate that there were very few returns being submitted in the early months (which is the period which would affect me) which would demonstrate that HMRC had clearly not done enough to publicise the law change in advance of it. Also perhaps, to show that they were cancelling a large majority of the initial fines (perhaps as they realised how woeful they had been at implementation)

Other possible FOIs:
f) How many of the fines thus far levied have been on those already in the SA regime. (Actually thinking further on this one, it might also be pertinent to ask them in the 'number of returns filed each month' how many related to people already in SA and those not too! The point I am driving at is that I am sure this requirement is NOT achieving its aim to capture people not in tax net and in the meantime it is unduly penalising those who already are in SA anyway)
g) What has the cost of implementation and administration been so far (given that in the December 2014 document is stated that the cost was estimated at 3.5m and that increased payments to the exchequer would be 15m by end of 16-17 (and yet per the FOI request they had only noted tax due of some 7.5m as at end of January 2017 so a long way short of the 15m (UNLESS they fine everyone massively to make up those figures of course...!)). I also imagine that their costs have probably way exceeded the 3.5m as they will be dealing with so many appeals plus all the associated FOI requests and court costs etc.

Do any of you have any thoughts or advise on those as potential FOI requests??

Also - the last thing I wanted advice and people's input on is this - can anyone tell me (and point to the source) regarding what exactly HMRC's responsibility is with regards to informing people of new law changes that might affect them and / or informing the wider public of changes to tax law as a whole? I want to focus in my appeal on the fact that virtually ALL the correspondence before the law change (and it was scant anyway), and a good portion of it afterwards, was targeting people involved in advising clients and NOT the general public. So again - any advice or guidance people can offer on this would be most appreciated.

Thanks, LSH

[etf]

This seems like a very good template for individuals claiming they have a reasonable excuse to be aware of (lifted from the Scowcroft tribunal summary):

Approach of the Tribunal to this issue
120. The Upper Tribunal in the case of Perrin v HMRC [2018] UKUT 156
(“Perrin”) has given some guidance to the First-tier Tribunal to the approach to be
taken to claims that an appellant has a reasonable excuse for a failure to file on time.

121. At [81] it says:
“When considering a “reasonable excuse” defence, therefore, in our
view the FTT can usefully approach matters in the following way:

(1) First, establish what facts the taxpayer asserts give rise to a
reasonable excuse (this may include the belief, acts or omissions of the
taxpayer or any other person, the taxpayer’s own experience or
relevant attributes, the situation of the taxpayer at any relevant time
and any other relevant external facts).

(2) Second, decide which of those facts are proven.

(3) Third, decide whether, viewed objectively, those proven facts do
indeed amount to an objectively reasonable excuse for the default and
the time when that objectively reasonable excuse ceased. In doing so, it
should take into account the experience and other relevant attributes of
the taxpayer and the situation in which the taxpayer found himself at
the relevant time or times. It might assist the FTT, in this context, to
ask itself the question “was what the taxpayer did (or omitted to do or
believed) objectively reasonable for this taxpayer in those
circumstances?”

(4) Fourth, having decided when any reasonable excuse ceased, decide
whether the taxpayer remedied the failure without unreasonable delay
after that time (unless, exceptionally, the failure was remedied before
the reasonable excuse ceased). In doing so, the FTT should again
decide the matter objectively, but taking into account the experience
and other relevant attributes of the taxpayer and the situation in which
the taxpayer found himself at the relevant time or times.”



PS

Someone's find looks a bit of a gem.

RBK-I think you need to learn to get off that fence (perhaps we should refer to them as Dick Dastardly and Muttley going forward...drat and double drat ).

LSH-re FOI I suggest you ask for any data which you think may help your case. In my very limited dealings with the FOI office, they did try and encourage me to cease my quarterly requests and they may refuse to release any juicy data (e.g. the reason why 778 appeals were accepted), but otherwise they provide a prompt service.

[etf]

HMRC's stock response to a Judge Thomas NRCGT FTT decision:

https://www.youtube.com/watch?v=RXKJolS9Atg

PS Has anyone else thought we should transfer Judge Thomas to the Brexit team? After all, his favourite book is Eats, Shoots and Leaves (other zero tolerance approaches to punctuation are available).