Non-resident CGT: reporting the gain on the sale of residential property

Prior to 6 April 2015 non-UK residents did not have to pay capital gains tax (CGT) on the disposal of UK residential property. From that date tax is payable on any gain arising. This is referred to as non-resident CGT (NRCGT). 

Some people have been caught out by the tight deadlines to report gains and pay the tax. This news item provides a reminder and also reports on some recent cases on penalties. 

Calculating NRCGT

The gain is calculated in the normal way unless the property was owned at 5 April 2015 in which case the taxpayer has the choice as to how to calculate the gain, either: 

  • the gain arising after 5 April 2015 (a formal valuation is not essential), or
  • elect for time apportionment, or
  • elect for the whole gain to be brought in (normally done if it is a loss).

Reporting the gain and paying the tax

The disposal of the property has to be reported within 30 days. If the seller is not within the self assessment (SA) regime the tax has to be paid within the same 30-day time frame. The sale has to be notified whether or not there is any tax payable. 

Several people have been caught out by the reporting timetable, being unaware that there is a reporting requirement separate from the SA regime. When they notify the disposal on their SA return they find themselves landed with penalties of £1,600: fixed penalties of £100 + £300 +£300 plus daily £10 penalties totalling £900. HMRC has relaxed on the daily penalties but the £700 penalties remained in place. 

Recent cases

Two cases last autumn Rachel McGreevy and HMRC TC/2017/04089 and Patsy-Ann Saunders and HMRC TC/2017/02882 concluded that there was reasonable excuse for late filing as the individuals could not be expected to know about the filing requirements. 

Two later cases, in December 2017, David Hesketh and Jennifer Hesketh and HMRC TC/2017/5804 and 5807 and Robert Clive Welland and HMRC TC/2017/3237 both came down in favour of HMRC saying ignorance of the law was no defence against the penalties and the penalties were not disproportionate. Although Mr Welland did manage to get two of his penalty charges overturned, he had sold three houses in quick succession and just the penalty on the first sale remains in place.