Expat Wins CGT Property Challenge Against HMRC Penalties

Lisa Smith, BA (Hons), CeFA

HM Revenue & Customs has lost another challenge by an expat property owner against unfair charges for failing to file a capital gains tax return.

Patsy-Anne Saunders, who has lived in Saudi Arabia since 2012, wrongly assumed that when she sold a property in November 2015 that any capital gains tax would be dealt with on her next self-assessment return.

As the property was rented out, she had declared the income on a tax return while overseas.

She missed the 30-day deadline for filing but was only aware of the problem when she started to complete here self-assessment return for 2015-16.

Although she made a capital loss on the property sale, HMRC issued a demand for late-filing penalties.

Non-residents must pay CGT when disposing of land or a home in the UK. This is often overlooked and must be considered in correct financial planning. You can read more about CGT when selling UK property here.

Ignorance of the law is no excuse

HMRC argued that even though Ms Saunders lived overseas and did not know tax rules had changed in the UK, ignorance of the law was no excuse and as no special circumstances applied, she would have to pay the full penalty of £1,300.

Ms Saunders appealed, and the case went before Judge Michael Connell at the First-Tier Tribunal.

The judge decided Ms Saunders did not have to file a return as she had no capital gain to report, so was not a taxable person under CGT rules.

He also ruled that as Ms Saunders genuinely believed she could report the loss on her next self-assessment return, she had a reasonable excuse for late-filing.

Preposterous expectations

The judge discussed another judge’s findings in the case of Rachel McGreevy v HMRC and reiterated his argument that “it is also preposterous to expect that a document on HMRC’s website which is not easy to find for a tax judge makes invalid all possible excuses about not knowing of the NRCGT return deadlines.”

The appeal was upheld and HMRC’s penalty was dismissed.

Ms Saunders told the tribunal: “My only mistake was to sell a property and report the sale in accordance with my year-on-year practice of returning self-assessment forms as undertaken since 2012.

“The response from HMRC has been heavy handed and disproportionate to my situation. I have acted in good faith and even offered a settlement in my original appeal. But instead of applying ‘reasonableness’ HMRC have sought to apply full retribution.”

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