Non-Residents Beware – Ignorance of UK Tax Law is No Excuse

About 900,000 UK citizens are long-term residents abroad, and it is no particular surprise that they may be less careful about managing their UK tax affairs than those who live in the UK. Many foreign residents retain UK properties, and when these are sold a Capital Gains Tax (CGT) return in respect of the sale must (since 6 April 2015) be filed with HM Revenue and Customs (HMRC) within 30 days of the disposal. This applies even if no CGT liability results. Note that this is different from the normal reporting of capital gains, which are reported on the annual tax return, for which the deadline for filing is 31 January following the end of the tax year (the previous 5 April).

The penalties for failing to file the CGT return are £100 as soon as the return is late, then £10 per additional day for returns that are more than three months late. After a return is six months late, the penalty rises to 5 per cent of the tax due, and then 10 per cent of the tax due if it is more than 12 months late.

The changes were not terribly well publicised. Needless to say, many properties were sold by people living abroad who were completely unaware of their responsibilities. After considerable protests, most of the daily penalty notices were withdrawn.

When a long-term resident of Australia contested penalty charges levied on him, the First-tier Tribunal (FTT) quashed them, agreeing that it was unfair to expect the man to keep a weather eye on changes to UK tax law when he was living abroad – but that was last September. In two more recent cases, the FTT has ruled in favour of HMRC and confirmed the penalties…ignorance of the applicable law being deemed not to be an excuse for not complying with it.