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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13777
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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1. In 2015-2016 I have been non resident due to full time employment

Resolved Question:

1. In 2015-2016 I have been non resident due to full time employment abroad.
2. At the end of April 2015, I sold a flat.
3. The flat was bought in 2000.
4. From 2000 until February 2015 the flat was let.
5. In February 2015 I moved into the flat and used the flat as my main residence there until the day of sale.
The question is: Am I liable to pay any capital gains tax?
Submitted: 11 months ago.
Category: Tax
Expert:  Sam replied 11 months ago.
HiThanks for your question - I am Sam and I am one of the UK tax experts I will need some additional information before I can advsie furtherYou advsie that you have been non resident for 2015/2016 - has this been formally confirmed by HMRC?May I ask where were you between 2000 and Feb 2015 when you moved into the flat.Did you reside in the UK or abroadDid you own any other property - and if so was this your main residenceWhat led you to move back into this flat from Feb 2015 to April 2015 - during this time did you move all aspects of your live to this property? When did you leave the UK - and what visits did you have during 2015/2016 (so far to date) What are your future plans regarding staying abroad ? Is this is a permanent move or just for a set period - for example 2 or 5 years Thanks Thanks Sam
Customer: replied 11 months ago.
Dear *****,Many thanks. Answers to your questions:1. We have not yet notified HMRC about the change in residency status.2. Until 2015 we have been living in the UK, since 1993, when we first arrived in the UK from abroad (we are British citizens, naturalised).3. Between 2000 and 2003 we have been living in another house that we owned in the UK. From 2003 until 2011 we lived in rented accommodation. From June 2011 until 2015 we have been living in a property we own.4. From June 2011 until 02/03/2015 we lived in another house we owned, and in which we let a few rooms and we have been living (my wife and I) in 3 of the rooms. At the end of february 2015, we decided to live in an independent flat and let more rooms in the other house (first reason: to generate more rental income). The second reason is relating the move abroad: Since early 2015, the employment situation of my wife had changed and she was full time employed abroad, so we decided to move into the flat, since we have been spending more time abroad and living in the other (shared) house was not convenient for us. We moved all aspects of our lives to the flat (i.e. all furnitures, personal effects, registration in electoral rolls, correspondence address for all our correspondence, including HMRC, etc). Then the flat was sold in 20/4/2015 and we moved to rented accommodation, since we did not want to move to the main house where we were living up until early 2015, due to the reasons mentioned above.5. It is actually my wife who left the UK to take up a full time employment position abroad - in early 2015. Since that time she has made 3 or 4 visits to the UK, of around 5 to 8 days duration each.6. My wife is permanently employed abroad and has been living permanently abroad and planning to live abroad permanently. I plan to move abroad to be with her within the next 1-2 months. Our plans are to live permanently abroad. We have no family ties in the UK and we are also in the process of selling our main house. We will keep though 2 directorships in a company we have established in the UK - however, we are not employed by this company.Many thanks
Expert:  Sam replied 11 months ago.
Hi Thanks for your responses Then you will have a capital gain position for the whole of the period of ownership of this flat other than for the period Feb 2015 to the date of sale - and as you are still residing in the UK - then this gain will arise fully in the UK - For your wife - did she leave the UK before 06/04/2015? She seems to have quite a few linked ties, with you and the main home and the rental properties and the directorships - she she may also have a full UK gain to consider as she continued to have 4 ties which she has family (as you still reside here) , property she could stay in both through the rentals and owned property , the limited companies and that makes 4 ties - So I would certainly assume you both have capital gains liability on the sale of this flat - although there is exemption for the last 3 months/ total ownership and also consideration of private lettings relief, and of course the first £11,100 is exempt as this is the annual exemption allowance. Let me know if I can assist further Thanks Sam
Customer: replied 11 months ago.
Sam,Many thanks - very helpful.I understand that of'course I have full capital gains tax liability.The question is about my wife: She left before 6/4/15 and she is full time employed abroad. I read the HMRC document on non-residents and it seems to me that the fact that she is in full time employment abroad (and is very easy for us to demonstrate this, since she is employed by a public body - a University abroad) takes precedence over all other facts, including the 4 ties that could be in the UK. HMRC guidelines state clearly that the order of facts to consider when deciding if someone is automatically classified as non resident is: 1. That they spend less than 183 days in the UK and 2. that they are full time employed abroad. I would therefore argue that my wife has been automatically a non UK resident since early 2015.My questions are two:
1. What is your view on the above?
2. If she is indeed a non UK tax resident is she exempt for paying capital gains tax for the tnire period of the ownership of the flat?Many thanks
Expert:  Sam replied 11 months ago.
Hi Your question asked whether you were liable to capital gains tax and you advised me you were to be treated as not resident for 2015/2016 - which is not the case. I have also advised re your wife after you had supplied additional information - she fails the statutory tests for 2015/2015 due to her ties in the UK and may qualify under the normal rules as not resident but you have not provided all the information asked for for me to determine this so please advsie what date she left the Uk to live and work abroad which I would need and advsie how long this employment contract is due to last for - and what ties she still has in the UK But I should advsie even if she can be treated as not resident for 2015/2016 then she will still have a partial gain on her half share of the property as the laws have changed since 05/04/2015 - see link here https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-propertywhich will render the whole gain liable as up to the date she left the Uk she has a UK consideration and may then have that UK exempt due to her non residency (thats why I need to know when she left the UK) but from 05/04/2015 to date of sale there is a UK gain (be it though I imagine very small!) Thanks Sam
Customer: replied 11 months ago.
Many thanks Sam,1. I do not remember the exact date (can of course find out) but my wife left the UK to take up her employed position abroad sometime in September 2014.
2. Her employment contract is for 3 years, counting from September/October 2014 (I think) with the prospect to become permanent employment after 3 years.
3. Ties in the UK since September 2014 (since she left):
(i) Ownership (half) of the flat that was sold in April 2015
(ii) Ownership (half) of a main house that hopefully will be sold within the next month (house is on the market and an offer has been made)
(iii) I (husband) am the only family member she has in the UK and have been resident here until today and will be resident until the date we sell the main house (say sometime in May 2016). Then I will also move abroad.
(iv) Directorship (and 25% shareholder) in one technology company, but not employed, no income whatsoever received from the company, no dividends, no expenses - absolutely nothing received (because the company does not yet have any revenues nor does it have any other funding!!). This will be the only tie with the UK that will remain, as soon as I go abroad, for both her and myself.I hope this helps
Many thanks
Expert:  Sam replied 11 months ago.
HI Thanks for your response Then at this stage there will be a capital gains tax bill as1) She at this stage does not have a guarantee of more than 5 years out of the UK which is what used to determine the exemption form UK capital gains (and then require the individual to declare the gain in the country of residence)2) There was the change of legislation to activate from 05/04/2015 - so the only true exemption period to qualify for just a considered gain from 06/04/2015 - was not present until Sept 2014 So had the rules stayed the same - and then from the 4 year employment contract this would not have allowed HMRC to accept exemption from capital gains for the whole period of ownership UNTIL this has actually been achieved.But due to the new legislation and your wife not having even achieved a full year out of the Uk by this point AND the fact that that the year she departs is also during which time the legislation changes - then she will be treated as resident for UK capital gain tax purposes So for 2014/2015 the year in question she spent time from 06/04/2014 to Date SEpt 2014 - then if this plus her visits back exceed 183 days then she will be treated as resident for that year and incur a full capital gain charge when added to the period 05/04/2015 to date of sale.See link here https://www.gov.uk/tax-foreign-income/residenceMy opinion is that your wife will have a UK capital gain but because of the complexity of this particular situation I would urge you to ask the Technical Team at HMRC to make a form ruling for your wife as they may actually just treat the year of departure from the date she left as not resident - after which the sale took place - But I would urge you to have this agreed in writing if so (although in my opinion I dont think that will be the case - but would be great if so!) Let me know if I can assist further I assume you advised HMRC of this sale within 30 days of the sale ? For your wife as she had by then left the UK? See link herehttps://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property#CGT-report-pay However
Customer: replied 11 months ago.
Sam,Many thanks - I think I understand the situation. Just a final question:Unfortunately we did not inform the HMRC within 30 days of the sale. We just realised yesterday, looking at the HMRC website, that this should have been done.
And we also did not advise HMRC of the date she left the UK.What could be the consequences? I read that there might be penalties and interest to pay, but I could not find any further details as to how much these would be and what could happen in our case, where we have not been aware of the requirement to inform the HMRC about these changes in circumstances.Many thanks
Expert:  Sam replied 11 months ago.
Hi Thanks for your response These will be the standard late filing fees - an initial £100 as per FA2009 Sch 55FA 2009 Sch 55( which currently are listed as applied for self assessment purposes) but the remit will remain the same statesSchedule 55 FA 2009Penalties charged automaticallyParagraph 3 - Initial fixed penalty - one day lateA person who fails to file their return by the filing date is liable to an initial fixed penalty of £100 on the penalty date. The penalty date is the day after the filing date (paragraph 1(4)).Paragraph 4 - Daily penalties - three months lateDaily penalties apply if the failure continues after the end of the period of three months beginning with the penalty date. The legislation provides for HMRC to decide that a daily penalty should be payable and to give notice to the taxpayer specifying the date from which the penalty is payable. The daily penalty is £10 for each day that the failure continues during the period of 90 days beginning with the date specified in the notice given to the taxpayer.Paragraphs 5 and 6 - Tax-geared penalties - six months and 12 months lateIf the failure continues six months after the penalty date, there is a further penalty based on a percentage of the tax liability that would have been shown in the return (paragraph 5). The penalty is the greater of:5% of the tax liability which would have been shown in the return, and£300.The same penalty will apply if the failure continues 12 months after the penalty date (paragraph 6). In certain circumstances, the paragraph 6 penalty at 12 months will be higher (see heading Behavioural Penalty).All penaltiesA person becomes liable to the daily penalties or further penalties even if they have not been charged some or all of the previous penalties. For example, a person becomes liable to the penalty after 6 months even if they have not been charged daily penalties.Penalties charged automatically - examplesThe following examples reflect the different filing and penalty dates for electronic (online) and non-electronic (paper) returns.Online return - one day lateThe filing date for Emma’s 2011-12 return is 31 January 2013. Emma files her return on the day after the filing date - 1 February 2013. This is the penalty date and Emma is liable to the initial fixed penalty of £100.Online return - more than 12 months late The filing date for Jonathan’s 2012-13 return is 31 January 2014. Jonathan files his return on 3 February 2015. His return shows a liability of £3,000. Jonathan is liable to the following penalties:the initial fixed penalty of £100 on 1 February 2014daily penalties of £900 (90 days at £10 for each day from 1 May to 29 July 2014)a tax-geared penalty of £300 on 1 August 2014 (£300 is greater than 5% of £3,000)a tax-geared penalty of £300 on 1 February 2015 (£300 is greater than 5% of £3,000)Paper return - one day lateThe paper filing date for Sophie’s 2011-12 return is 31 October 2012. Sophie files a paper return on the day after the paper filing date - 1 November 2012. This is the penalty date and Sophie is liable to the initial fixed penalty of £100.Paper return - more than 12 months lateThe paper filing date for Ben’s 2012-13 return is 31 October 2013. Ben files a paper return on 3 November 2014. His return shows a liability of £3,000. He is liable to the following penalties:the initial fixed penalty of £100 on 1 November 2013daily penalties of £900 (90 days at £10 for each day from 1 February 2014 to 1 May 2014)a tax-geared penalty of £300 on 1 May 2014 (£300 is greater than 5% of £3,000)a tax-geared penalty of £300 on 1 November 2014 (£300 is greater than 5% of £3,000)Top of pageBehavioural Penalty - 12 months lateParagraph 6The percentage of the tax liability used to calculate the paragraph 6 penalty can be increased to 70% where by failing to make the return a person deliberately withholds information that would enable or assist HMRC to assess their correct tax liability. The percentage can be increased further to 100% if the withholding of the information is concealed.This is the only penalty for failing to file a return which considers the person’s behaviour that led to the failure. There is further guidance on the behavioural penalty in the Compliance Handbook.Top of pageSpecial ReductionParagraph 16If HMRC think it right because of “special circumstances”, they may reduce any late filing penalty. For this purpose, a special circumstance does not include ability to pay or the fact that a potential loss of revenue from one taxpayer is balanced by a potential overpayment from another.For guidance on special reduction, see the Compliance Handbook.Top of pageAssessment of late filing penaltyParagraph 18An officer of the Board is required to serve a notice of assessment stating the period in respect of which the penalty is assessed. The assessment is to be treated in the same way as an assessment to tax. A late filing penalty must be paid within 30 days of the date on which the notice of assessment of the penalty is issued. Late payment interest will run from the end of the 30 day payment period until payment.Top of pageRight of appeal against penalty assessmentsParagraph 20There is a right of appeal against HMRC’s decision that a penalty is payable and / or against the amount of the penalty payable.Paragraph 21There is no obligation to pay the penalty before an appeal against the assessment of the penalty is determined.Paragraph 22On appeal, the First-tier Tribunal may affirm or cancel HMRC’s decision or substitute for HMRC’s decision another decision that HMRC had power to make. This includes consideration of HMRC’s decision on special reduction.Top of pageReasonable excuseParagraph 23Under paragraph 23, liability to a penalty for failing to make a return does not arise where the taxpayer satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal, that there is a reasonable excuse for the failure. For this purpose:an insufficiency of funds is not a reasonable excuse unless attributable to events outside the taxpayer’s controlreliance on any other person to do anything is not a reasonable excuse unless the taxpayer took reasonable care to avoid the failurewhere the taxpayer had a reasonable excuse but that excuse has ceased, they are treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceasedI had a quick look in the capital gains manual but it just makes reference to FA 2009 Sch 55 - hence the posted detail above You will be liable for the late penalty as you are late with reporting to HMRC and sadly ignorance is not an accepted excuse - Can I also advsie that at this stage this is leading to more and more questions, which you really should list as new questions (as per Just Answer policy) but as this appears to be your first time on Just Answer, I have proceeded with answering, but if you need any additional information from your question first indicated, then you will need to list this as anew question or alternatively I can offer you more Q & A time (which will also incur an additional charge) But I hope you have all that you need - and Get the NRCGT return into HMRC as soon as possible Thanks Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13777
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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