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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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,I am a Dutch citizen, living in the UK and I have a property

Customer Question

Hi,I am a Dutch citizen, living in the UK and I have a property in Luxembourg over which I earn rental income and pay tax.
Because I already paid tax over the rental income in Luxembourg, I never considered paying tax again in the UK.
However, after checking with HMRC it appears I do have to pay additionlal income tax and had to submit tax returns dating back to 2010.
On top of the tax returns HMRC has also issued me with late filing and late payment penalties, totaling 4000£.
But since I've reported the situation to HMRC myself and have been fully cooperative, I do not understand why I am also being made to pay such a heafty amount of penalties.
Can you pls advice is these penalties seem fair? Or is there a case for appealing?
After speaking to HMRC many times I keep on getting a different answer. The penalties for '10/'11 were initally waived after my complaint but then all other penalties were issued and even the waived penalties from'10/'11 were issued again.
Thank you!
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.


Did you complete annual tax returns before you realised that, in the absence of a claim to be taxed on the remittance basis, you should have been disclosing your Luxembourg rental income in your UK tax returns?

Can you tell me how the penalties are split between tax years please.

Customer: replied 3 years ago.


No I didn't complete annual tax returns as I was in full-time employment and my employer was taking PAYE tax and national insurance from my pay.

This whole issue started when I wrote to HMRC and explained the siuation.

The split is as follows

Tax to be paid17621649206216527125
Late filing100 100
6 month late filing penalty100300 300
Daily penalty 900 900
30 days late payment penalty 1038288
6 months late payment penalty 1038288
12 months late payment penalty 10382
Other (can't figure out what it's for)165300
Total Penalties365180924614763896

So £3896 penalties for a total tax amount of £7125

Thank you


Expert:  TonyTax replied 3 years ago.

Leave this with me while I draft my answer. It will take a while.
Customer: replied 3 years ago.

Great Tnxs!

Customer: replied 3 years ago.

Oh one more thing that will be good to be aware of as well:

I already appealed the 2011 penalty before on the grounds that it was a genuine mistake, I vulontarily reported the situation and I already paid tax in Luxemborug. This was approved by HMRC and the penalty removed.

Then I was issued with the penalties for all the other years, I appealed those as well on the same grounds as the 2011 appeal, but to my big surprise, this was rejected!

I then said to HMRC that my appeal for the 2011 penalties had already been approved and then they said I also needed to pay 2011.

But I am still waiting for a reply to my appeal for all the other penalties.

Hope this helps.



Expert:  TonyTax replied 3 years ago.

Hi again.

As a non-UK domiciled individual, you have the choice to pay UK tax on that part of your non-UK source income which you remit to the UK. Whether you would choose to use this basis of assessment depends on how long you have lived in the UK and how much non-UK source income you have. See Section 9 of RDR1 here for more information. Any tax paid in Luxembourg on the rental income should be deducted from the UK tax liability on the same income if it is taxed in the UK..

As far as the penalties are concerned, these can be £1,600 or more per tax year from 2010/11 (£100 + £900 + £300 + £300) depending on how late the tax return is submitted and how late any tax due is paid. Normally, if the tax office find that a taxpayer has rental income which has not been disclosed before the taxpayer contacts HMRC, they assess the tax and charge a penalty which can be as much as 100% of the tax owed. It will usually be less if the taxpayer has approached HMRC first.

You appear to have been charged a series of late filing penalties and late payment penalties. In cases where the taxpayer has told HMRC of the income, albeit late, they don't normally issue tax returns for the earlier years which could incur penalty charges and instead charge a late notification penalty and late payment penalties which would usually be less than those you have been hit with. Take a look here and here for information on late filing and late payment penalties.

I have to say that I feel you have been dealt with rather harshly and you should appeal against the penalties for late filing. Read the notes here and complete the appeal form. You should explain that as a foreign national, you were not aware of the UK tax situation and that the late filing penalties are harsh, given that you approached HMRC and normally in such cases, earlier years returns are not required and HMRC assess the tax liabilities for those tax years outside the self-assessment system. You might also consider making a complaint over the cancelled penalty which was re-imposed. Read about the complaints procedure here.

I have to say that if HMRC refused to back down and you took this to a tax tribunal, you would have a better than evens chance of wining.

I hope this helps but let me know if you have any further questions.

PS I just saw your last post and see you have already appealed.