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October 16, 2017

Penalties for Late Filing of NRCGT Return Cancelled

In the recent case of McGreevy v HMRC, the First Tier Tribunal judge found in favour of the taxpayer, who was held to have a reasonable excuse for not filing their Non Resident Capital Gains Tax (NRCGT) Return within the 30 day deadline.

HMRC will allow a taxpayer to appeal a penalty where they have a reasonable excuse, however the requirements that must be met in order for an excuse to be considered reasonable can be stringent. The ruling represents a common sense approach to determining what is a reasonable excuse.


Where an individual is not a resident in the UK, and disposes of a UK residential property, the disposal must be reported to HMRC on NRCGT Return within 30 days of conveyance. Any tax due is payable by the same deadline unless the individual is registered for Self-Assessment, in which case they can pay when they submit their Self-Assessment tax return.

The taxpayer (McGreevy) disposed of her property in July 2015. Capital Gains Tax (CGT) payable on the sale was nil, mainly due to Principal Private Residence Relief.

HMRC contacted the taxpayer by letter in September 2016, notifying her of the NRCGT Return deadline and £1,600 in late filing penalties.

It should be noted that HMRC have since withdrawn the daily penalty on NRCGT tax returns, which would account for £900 of penalties in this case. HMRC have confirmed the following late filing penalties for NRCGT returns will apply:

  • there is an initial penalty of £100 in all cases;
  • plus a further penalty of 5% of the tax due or £300 if greater for returns over 6 months late;
  • plus a further penalty of 5% of the tax due or £300 if greater for returns over 12 months late.

The taxpayer responded to HMRC to appeal the penalties in full, and after further correspondence, the matter was brought to Tribunal.


The taxpayer’s appeal was based on the fact that they believed that the capital gain would be reportable and payable under their annual Self-Assessment tax return, due by 31 October following the tax year (paper tax return), which was filed on time. She stated that she had made a reasonable and honest mistake, and had promptly rectified the error upon realising that a NRCGT return was due.

HMRC provided that ignorance of the law is not a reasonable excuse and that the requirement to file a NRCGT return within 30 days was well publicised. Furthermore, the taxpayer, acting as a prudent person, had an obligation to stay up to date with changes any UK tax law that would affect her activities in the UK.

The judge considered the law and guidance in place for filing both Self-Assessment and NRCGT Returns. They also researched the consultation documents and publications released up to April 2015 when the NRCGT Return became active. In addition, consideration was given to whether HMRC had made any efforts to contact the taxpayer with regard to their filing obligations.


The judge went to great lengths in analysing the introduction of the NRCGT return, and HMRC’s efforts in publicising the new requirements to taxpayers, and overall communications were found lacking. In the past (as noted by the judge), HMRC have made ‘excellent arrangements relating to the penalties for CIS and PAYE and the introduction of RTI.’

The judge noted in coming to the decision that:

  • there was no notification of the taxpayer’s requirement to file a NRCGT return in their paper Self-Assessment tax return;
  • that HMRC could have targeted the taxpayer with information on NRCGT obligations, as they were 'on their radar' as a non-resident owner of UK residential property, and;
  • that the documents on HMRC’s website detailing NRCGT return deadlines were not easy for the judge to find, and so it would be ‘preposterous’ to expect the taxpayer to be aware of such deadlines.

The taxpayer was found to have a reasonable excuse and the judge stated that the penalties should be cancelled, or otherwise reduced to 1p (as a previous Court of Appeal decision has found that ‘nil’ is not regarded as an amount).

If you have any queries regarding your residency and/or capital gains tax on property, please contact a member of our team for a no-obligation chat.

Contact us today to discuss your tax requirements.
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