When a non-resident person (individual, corporate or trust) disposes of a residential property in the UK on or after 6 April 2015, that disposal must be reported for the purposes of non-resident capital gains tax (NRCGT). The reporting deadline is 30 days from the date of completion, as we explained in our newsletter on 6 October 2016
This deadline has been catching out many taxpayers and their advisers. Where the vendor is not registered with HMRC any tax due under NRCGT is also payable by the same deadline:30 days after the completion date. Those vendors who are already registered with HMRC (for ATED, self-assessment or CT) can opt to pay the NRCGT due as part of the irregular tax return, on the normal due date for that tax return. However, the report of the transaction must be made on an NRCGT return within 30 days of the conveyance, which is the date that date property legal belongs to the new owner.
If the NRCGT return is not submitted on time a late filing penalty applies. This penalty regime is constructed in the same fashion as SA late-filing penalties; £100 for one day late, £300 if 6 months late, and a further £300 if 12 months late. Where the NRCGT is payable the 6 and 12 months penalties will be; the greater of 5% of the tax due and £300. HMRC can also impose daily £10 penalties for NRCGT returns which are filed between 3 and 6 months late.
Where an individual sold a property subject to NRCGT on 1 May 2016, the NRCGT return is due by 31 May 2016. If the taxpayer assumed the transaction should be reported on their 2016/17 SA return, reported it to their tax adviser on 31 May 2017, they will have accrued a late filing penalty of £1600 by that date.
This is particularly harsh as there has been very little publicity about the NRCGT regime, and there is no guidance in the HMRC Capital Gains manual. The CIOT have raised this matter with HMRC, who have agreed to stop issuing the daily £10 late filing penalties for NRCGT. Any daily penalties already issued for NRCGT will be withdrawn, but the other penalties will remain.
All late filing penalties can be appealed, and may be cancelled if the taxpayer has a reasonable excuse. Note that where the disposal falls under the no gain/ no loss provisions, such as a gift between spouses, a NRCGT return is not required (TMA 1970, s 12ZBA).