In April 2020, the UK government introduced the requirement for UK residents to report and pay capital gains tax (CGT) on disposals of UK residential property within 30 days. The deadline was extended to 60 days for all completions on or after 27 October 2021. Non-residents have had an obligation since 2015.
Once a disposal has been reported on a self assessment (SA) return, it is not possible to submit a CGT on property disposal (CGT PPD) return. Therefore, it is important to file the CGT PPD return before the SA return, even where the need for a CGT PPD return is only identified when preparing the SA return.
The only exception is where the SA return is filed within 60 days of completion of the property transaction (ie, before the deadline for the CGT PPD return). In that situation, it is not necessary to file a CGT PPD return.
ICAEW is aware of cases where disposals were reported on a 2020/21 SA return, but no CGT PPD return was filed. It is not now possible to file the CGT PPD return. ICAEW has asked HMRC how taxpayers should correct that default and what position it will be taking with regard to penalties for not having filed a CGT PPD return. It seems that it will be some time before this question will be answered.
HMRC finally published its guidance on reporting capital gains on UK property in December 2021 and continues to update the manual.
Self assessment payment offsets
For 2020/21, where the CGT liability per the SA return is lower than the CGT reported and paid on the CGT PPD return, it is necessary to phone HMRC to request a manual offset.
This issue has been mostly fixed for 2021/22 returns. Any CGT overpaid is offset against income tax due. However, the fix does not cover the situation where the SA return shows an overall refund. In that situation, it is still necessary to phone HMRC to request a refund of the CGT paid.
Other issues being discussed by the professional bodies and HMRC include:
- Difficulties obtaining a paper CGT PPD return and the significant number of cases where a paper return is needed. This includes cases where the taxpayer is unable to set up a government gateway account because of the limited identity verification options available. It also includes non-resident taxpayers who have no requirement to obtain a unique taxpayer reference (UTR), but who are required to report transactions with no tax liability. It is understandable that HMRC wants to encourage online filing. Most agents and taxpayers prefer that option, but it needs to be acknowledged that many can only file paper returns and it needs to be easier to obtain a form.
- Delays to the processing of paper CGT PPD returns. As of 23 May 2022, HMRC was processing the CGT PPD returns received on 19 April 2022, so it is reasonably up to date. Payment cannot be made until the return has been processed and the payment reference has been issued. HMRC allows 30 days from the date the assessment is issued before charging late payment penalties (assuming this is later than the normal 60-day deadline).
- The lack of an option to appoint an agent for CGT PPD returns only other than using the digital handshake (eg, where a paper return is required). An agent can be appointed using a 64-8, but that does not give access to the online service and would displace any existing agent appointment.
- The need for greater awareness. HMRC is exploring how it might use land registry data to alert taxpayers to the requirement to report CGT within 60 days of completion.
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