Can ignorance of the law be an excuse in relation to tax matters?
Posted on Thursday 13th December 2018
One of the most fundamental legal principles is that ignorance of the law is not an excuse and indeed can harm you (or "Ignorantia iuris non excusat" and "Ignorantia iuris nocet” for those classically minded). It seems, however, that in certain cases relating to the filing of tax returns the courts have accepted that ignorance of the law can in fact be a reasonable excuse.
All the cases in question involved non-UK residents who disposed of UK properties and failed to complete the non-resident capital gains tax (“NRCGT”) return within the 30-day deadline. In all cases the taxpayers claimed that they were unaware of the requirement to file the return within the new time limit and this was a reasonable excuse for failing to comply with the legislation.
On the one hand we have had a few cases where ignorance of the law has been accepted as an excuse albeit in a very narrow set of specific cases and, obviously, based on the facts of each case. On the other hand, it is also clear that it very much depends on which judge the taxpayer ends up before and none of the decisions are legal precedents.
There have apparently been over 700 appeals in relation to late filing penalties in relation to NRCGT which clearly seems to support the contention that the change in the law was not publicised well enough. Given the number of cases HMRC lost, presumably they will take greater care in publicising changes to taxation in the future. Meanwhile it would generally not be wise to rely on this particular excuse when dealing with HMRC.
Dispelling your equity release myths...
Posted on Thursday 6th December 2018
For older homeowners who need some extra cash to supplement their pensions, equity release has a lot to offer. Equity release plans, called Lifetime Mortgages, are a carefully designed financial product for people aged 55 and over. They allow you to access some of the value tied up in your property, either as a lump-sum payment or a regular income stream and they have helped thousands of UK homeowners reach their retirement goals and lifelong aspirations by converting property wealth into financial freedom
But equity release is not always easy to understand and many people – quite rightly – have a number of questions about how the schemes actually work. We have put together a list of the top 8 Equity Release Myths and set the record straight.
Myth 1: You will no longer own your own home
Contrary to popular belief, taking out a lifetime mortgage does not affect the ownership of your home. With all equity release plans you can remain in your property for life as long as it is your main residence. One of the main benefits of a lifetime plan is that you are not selling a part of your property, you are just borrowing against it with no fixed end date. The fact that the mortgage lasts for as long as you need it makes it a great later life option because it removes age as a barrier to lending.
Myth 2: You can end up owing more than the value of your home
This is untrue. The ‘No Negative Equity Guarantee’ comes as standard with plans from Equity Release Council approved lenders and ensures that you will never owe more than the value of your property when it is sold.
Once the property ceases to be your primary residence and is sold, the sale proceeds are used to pay off the lifetime mortgage and any interest that you have allowed to roll up. Once the loan has been repaid, any remaining funds will be paid to you or your heirs based on the instructions in your Will. In the unlikely event that the property sells for less than the amount of the loan, the remaining balance will be written off.
Myth 3: You cannot release equity from your home if you have an outstanding mortgage
False. In fact, releasing equity to clear an existing mortgage has become one of the most popular uses of a lifetime mortgage. When you release equity from your home, the tax-free cash you release is first used to clear any existing debt secured against the property. The rest is then yours to spend as you see fit. Lifetime mortgages are increasingly being used by those who are looking to find a solution to the interest-only mortgage headache.
Myth 4: You must make monthly repayments with a lifetime mortgage
Lifetime mortgages differ from normal residential mortgages in that you do not have to make monthly repayments. Like any other borrowing, an interest rate is charged and any interest you choose not to pay is simply added to the total and paid when you or your heirs eventually sell the property. However, if you want to pay some of the money back into your property, you can do so with many plans.
Myth 5: There will be nothing left for an inheritance
There are some lifetime mortgages available that allow you to protect a portion of your equity for use in the future as an inheritance. However, it is becoming increasingly popular for people to use equity release to provide their heirs with an early inheritance. Not only does this allow them to help their family when they need it, but it also means they get to enjoy seeing their legacy in action.
Myth 6: Equity release isn’t safe
Actually, you’ll find that since 2004, the equity release market is fully regulated. All equity release providers and advisers are regulated and supervised by the Financial Conduct Authority (FCA) – which regulates and protects to put your mind at rest. There is significant consumer protection in place – whether you choose a lifetime mortgage or a home reversion plan. For extra piece of mind, there is also an industry trade body, the Equity Release Council (ERC), that represents providers, qualified advisers, intermediaries and surveyors who work in the sector. Members such as Ask ERIC must adhere to the Council's Statement of Principles, which puts in place safeguards for you.
Myth 7: What if my circumstances change? I don't want to get saddled with early repayment charges
Early repayment charges can indeed be expensive, but in some circumstances they won't apply. Options such as no charges or voluntary partial repayment have greatly enhanced the flexibility of equity release products.
Myth 8: I might not want to stay here forever. Wouldn't equity release tie me down to this house?
Many equity release products are portable. As long as your property meets the criteria of your equity release provider, you may be able to move and take your plan with you. One thing to note is that the value of the property you are moving to must be enough that the equity release provider is happy to lend the same amount against it. If not, you may have to pay off some of the amount you’ve borrowed early.
Having to move into a residential care home is one of the reasons an equity release scheme can be brought to an end, with the money that has been borrowed repaid to the lender. However, there are a few points to bear in mind. Firstly, if you have taken out an equity release plan as a couple, the plan will continue as long as one of you remains in the home – so if one spouse moves into care, the equity release scheme will keep running if the other partner stays in their property.
The same applies if one partner dies: as long as the surviving husband or wife remains in the home, there is no obligation to pay off the equity release borrowing. If both partners need to move into care, the home will probably be sold at this point to pay off the equity release loan.
A market independent specialist like Ask ERIC the Equity Release Information Centre, with over 30 years experience can help to advise on the most suitable product based on individual circumstances. All plans offer a no negative equity guarantee. Face to face or telephone consultations are offered and specially trained and qualified advisers will guide you through the process without any pressure or stress.