In a recent case at the First Tier Tribunal, the taxpayer Sunday Salokun found himself facing a substantial tax bill and penalties totalling £100,485. His failure to declare the sale of three properties and the submission of inaccurate self-assessment tax returns resulted in an uphill battle with HMRC.

What makes this case stand out is Salokun's decision to represent himself, opting to forego professional counsel, and the subsequent dismissal of his appeal. This serves as a stark reminder of the importance of seeking professional and trusted advice when dealing with Capital Gains Tax (CGT) liabilities.

Today’s blog breaks down the importance of proactive tax planning and seeking professional and trusted advice.

A Cautionary Tale on CGT

Salokun, who had engaged in multiple property transactions, failed to include these acquisitions in his self-assessment tax returns. HMRC subsequently demanded unpaid capital gains tax of £67,177.28 for the tax years 2014 to 2016, along with penalties of £33,307.74 for inaccurate self-assessment tax returns covering the same period.

The properties in question, purchased for £120,000 and £135,000, faced undeclared property disposals. Complicating matters further, the files for the final property were stolen, and the solicitor did not possess the necessary documentation from the sale.

Salokun's attempt to rectify the situation by amending his tax returns in July 2018 proved challenging. Despite declaring capital gains for the three properties sold over the period, one of the figures exceeded the time limit for amendments. HMRC, however, treated it as an attempted amendment.

The tribunal revealed that Salokun, in response to HMRC's enquiry, explained that he sold the properties to fund the care of his ailing wife, who required 24-hour assistance. He argued that the government had instructed him to sell his assets for this purpose, believing himself exempt from paying capital gains tax under these circumstances.

The Case Overview

Despite Salokun's personal challenges, the burden of proof lay with HMRC to demonstrate the correctness of the assessments and penalties.

The tribunal upheld HMRC's position, dismissing the appeals against the tax assessments. However, they did reduce the penalty charges for the 2015/16 and 2016/17 years based on new calculations from HMRC.

The tribunal's decision

Salokun's case serves as a cautionary tale about the complexities of CGT and the pitfalls of navigating them without professional guidance. While his personal circumstances were undoubtedly challenging, the tribunal emphasised the importance of accurate and timely filing, placing the onus on the taxpayer to demonstrate reasonable care in their submissions.

The news report underscores the critical need for professional and trusted advice when dealing with CGT liabilities. Taxpayers facing intricate tax situations, especially those involving property transactions, must recognise the value of expert counsel. Seeking guidance can help navigate the complexities of tax laws, identify planning opportunities, and ultimately avoid the costly consequences of inaccurate filings.

As a Tax Practice specialising in CGT, we strongly advocate for proactive tax planning and encourage individuals and businesses to leverage the expertise of professionals to safeguard their financial interests.

The Lesson Learned

Capital Gains Tax Expertise: The Tax Faculty LLP Managing Partner Charles Tateson Named UK Capital Gains Tax Advisor of the Year 2023

The Finance Monthly Taxation Awards recognises the achievements of tax professionals from around the globe.

Winning such an award is no small feat. It is a reflection of hard work, extensive knowledge, and an ability to navigate the intricacies of the UK tax system.

Read more about Charles and the award here.

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