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Inaccurate Self-Assessment Tax Returns Leaves Property Owner with £100k Penalties

Published by Chirag
Published Date: November 20, 2023

In a recent Capital Gains Tax case at the First Tier Tribunal, a property owner, Sunday Salokun, who failed to declare the sale of three properties and submitted inaccurate self-assessment tax returns, is now obligated to pay a substantial sum of £100,485 in tax and penalties.

Salokun, who chose to represent himself rather than seeking legal counsel, disputed HMRC's demands for unpaid capital gains tax totalling £67,177.28 from 2014 to 2016. Additionally, penalties of £33,307.74 were imposed for inaccurate self-assessment tax returns over a three-year period.

Undeclared Property Disposals

The assessments for the tax years 2014/15 and 2015/16 were related to undeclared property disposals. Salokun had acquired properties for £120,000 and £135,000, with the final property lacking documentation due to stolen files and the solicitor's unavailability.

Inaccurate Self-Assessment Tax Returns

Salokun filed tax returns for these years but omitted to disclose the capital gains. Subsequently, on July 16, 2018, he attempted to amend the returns, declaring capital gains for the three properties sold over the period. However, one of the figures exceeded the time limit, leading HMRC to treat it as an attempted amendment.

Reasons and Response to HMRC Enquiry

In response to an HMRC enquiry opened in January 2019, Salokun explained that his wife's illness necessitated 24-hour care, which social services refused to fund. Seeking advice from the council, he was advised to sell assets to cover care costs. He believed he was exempt from Capital Gains Tax (CGT) as the government instructed him to sell properties for his wife's care.

HMRC issued a 'view of the matter' letter, offering Salokun the option of an independent review or an appeal to the tribunal.

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Tribunal Decision and Penalty Reductions

Salokun appealed on April 16, 2021, citing an intruder's destruction of one property and claiming no income sources to pay the tax bill due to his wife's care costs.

Inaccurate Self-Assessment Tax Returns

The tribunal acknowledged HMRC's correct assessments and penalties issuance, shifting the burden to Salokun to prove inaccuracy or excessiveness. While the appeals against tax assessments were dismissed, the tribunal did reduce penalty charges for the tax years 2015/16 and 2016/17 based on new calculations from HMRC.

In conclusion, the case underscores the importance of accurate disclosure and adherence to tax regulations, as well as the potential consequences individuals may face for non-compliance with tax obligations. Property owners are urged to seek professional advice to navigate the complexities of tax matters, ensuring accurate reporting and avoiding legal repercussions.

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