A new requirement for UK residents to report and pay capital gains tax (CGT) on disposals of UK residential property within 30 days was introduced in April 2020. Non-residents have had an obligation since 2015. ICAEW’s Tax Faculty provides guidance on the digital service for reporting disposals to HMRC.
CGT 30-day reporting requirement
A new requirement to report and pay capital gains tax (CGT) on disposals of UK residential property applies to disposals made by UK resident taxpayers on or after 6 April 2020. The requirement applies to UK residents only where tax is due. The report is made using a new HMRC digital service and the report and payment are both due 30 days after the completion date.
The requirement applies to disposals made on or after 6 April 2020; the usual rules for determining the disposal date for CGT purposes apply (usually the date of exchange rather than the date of completion). Disposals made before 6 April 2020 are not caught by this new requirement, even if completion took place on or after 6 April 2020.
Reporting requirements for non-UK residents have been in place for longer than for residents. They are wider in scope and include:
- residential UK property or land (land for these purposes also includes any buildings on the land);
- non-residential UK property or land;
- mixed use UK property or land; and
- rights to assets that derive at least 75% of their value from UK land (indirect disposals).
Non-residents must report disposals even where no tax is due.
The relevant legislation can be found in Sch 2, Finance Act 2019. The professional bodies have all expressed concern about lack of awareness of the new requirement. It has been introduced at the same time as other changes which restrict principal private residence (PPR) relief mean that more disposals give rise to CGT. From April 2020:
- the final period exemption for PPR relief is reduced from 18 months to nine months (although the special cases in which the 36-month period applies remain unchanged); and
- lettings relief is only available in cases where the owner is in shared occupancy.
How to report
HMRC has developed a new digital service to support this requirement. The digital service allows agents and taxpayers to make any number of reports and to view the history of previous reports and payment. The functionality to amend reports was released on 14 October 2020.
The form that was in use for non-residents to report disposals should only be used for disposals made on or before 5 April 2020.
The report must be made online following the guidance on Report and pay Capital Gains Tax on UK property. Agents can make reports on behalf of clients and the guidance for agents is available on Managing your client's Capital Gains Tax on UK property account (the service can also be accessed directly from the agent services account).
The digital service is completely standalone and does not interact with the self assessment system. Accordingly, it does not use self assessment accounts or references. Existing agent authority (such as a 64-8) is not recognised for the service.
The taxpayer needs to set up a CGT UK property account regardless of whether they are reporting the gain themselves or whether they are appointing an agent to report the gain. They need to set up the account using the link shown above (the service is not available from personal tax accounts or business tax accounts).
Only once the CGT UK property account has been set up is it possible for the taxpayer to authorise an agent to report the gain on their behalf.
Further detail is available in the step by step guide below.
Step by step guide to reporting by an agent
HMRC’s guidance is available on Managing your client's Capital Gains Tax on UK property account. The agent must have already set up an agent services account (ASA).
Step 1: The client creates a CGT on UK property account
The client should follow the green ‘Start’ button from Report and pay Capital Gains Tax on UK property.
If the client already has government gateway credentials they sign in with those existing credentials. It is not necessary to set up new credentials for the service; a set of government gateway credentials that is used for any another government service can be reused.
If the client does not have any government gateway credentials, they will need to set some up. They should follow the same green ‘Start’ button but then click on the link underneath the sign in box where it says ‘Create sign in details’ and then follow the steps on screen to set up a username and password and verify their ID, before proceeding to create their CGT UK property account.
At the end of the process, the system issues a reference number for the CGT UK property account. This is a 15-digit number in the format XYCGTxxxxxxxxxx or similar. It is important that client keeps a note of this reference, as it will be needed for the subsequent steps.
Step 2: Client gives the reference number to the agent
Having created their CGT UK property account, the client gives the 15-digit reference number and their postcode (or country of residence if non-resident) to their agent.
Step 3: Agent requests access
The agent signs in to their ASA and selects ‘ask a client to authorise you’ and the manage the CGT UK property account service.
The agent enters the details provided by the client; this generates a time-limited link (it expires in seven to 14 days) which they can email to the client.
Step 4: The taxpayer authorises the agent
Once the client receives the link, they need to use it to authorise the agent before it expires. The taxpayer needs to sign in using the same government gateway credentials that they used in step 1.
Once the client has authorised the agent, the agent should receive an email to confirm that their appointment has been accepted.
Step 5: The agent files the return
Once the previous steps have been completed the agent should be able to sign in from their ASA to manage the taxpayer’s CGT UK property account (include reporting any disposals made in the future).
Returns can be saved for 30 days each time a change is made which allows the agent to send the return to the client for approval before filing. HMRC does not require a client signature but it is good practice to retain evidence of the client having approved the return.
Step 6: The taxpayer makes payment
We understand that, following successful filing, both the agent and the client receive a confirmation email from HMRC with details of how to pay the tax and the payment reference to use.
Digitally excluded clients
Some clients will be digitally excluded (ie, unable to interact digitally with HMRC due to age, disability, remoteness of location or for any other reason, including religious beliefs). Such clients (or their agent on their behalf) can request a paper return but where an agent is involved it may be better to use the telephone process described below to set up the CGT UK property account and authorise the agent as that will give the agent full access to the CGT UK property account digital service which filing a paper return does not.
HMRC can also offer support to clients who do have online access but who are unable to complete the necessary steps online.
As an alternative to a paper form, HMRC can assist taxpayers by setting up their CGT UK property account and appointing the agent over the phone. Although this might be time consuming it may be worthwhile as it gives the agent full access to the digital service on behalf of their client. This allows the agent access to file returns for subsequent transactions, to make amendments and to check whether payments have been received, (ie all the services that are available using the digital service which they will not get if a paper return is filed).
The assistance given on the phone depends on whether helpline staff consider the individual to be digitally excluded - so that all the work needs to be done by HMRC - or if they can be assisted by HMRC to set up the government gateway credentials and manage the process. HMRC helpline staff triage calls and refer appropriate cases to HMRC’s Extra Support team for support. In practice, agents may prefer to assist their digitally excluded clients through the process, rather than pass them over to HMRC.
HMRC has provided us with the following explanation of how its staff would complete the process over the phone.
- The agent asks their client to contact HMRC’s helpline 0300 200 3300 to register for a CGT UK property account.
- HMRC’s helpline adviser will confirm that client is digitally excluded and refer them to HMRC’s Extra Support service.
- HMRC’s Extra Support service adviser will help the client register for a CGT UK property account. This process will be done by phone or occasionally face to face, as appropriate.
- The registration process will result in the client receiving a CGT UK property account reference number. The reference number will be generated in real-time and provided to the client.
- The client gives the CGT UK property account reference number to their agent to begin the agent authorisation process.
- The agent logs into their ASA and selects ‘Ask your client to authorise you’.
- The agent enters their client’s CGT UK property account reference number, creating an invitation link. This would usually be emailed to the client to follow but we understand that the link doesn’t actually need to be sent out for a digitally excluded client with no email address, just created so it is on HMRC’s system.
- The client contacts HMRC’s helpline again (0300 200 3300) to request support to authorise their agent to access their CGT UK property account.
- HMRC’s Extra Support service adviser uses the client’s CGT UK property account reference number to identify the agent authorisation request.
- HMRC’s Extra Support service adviser confirms that the client is content for the agent to act on their behalf.
- HMRC Extra Support Service adviser creates the agent-client relationship.
- The agent is able to engage digitally with HMRC on behalf of client for CGT property disposals.
Digitally excluded taxpayers can contact HMRC on 0300 200 3300 to ask for a paper return (form reference PPDCGT – make sure that you are specific to avoid being incorrectly issued with SA108 pages). Agents can request a paper return on behalf of a digitally excluded client via the agent dedicated line.
The paper return is not available online to be downloaded. It is pre-populated by HMRC with some of the taxpayer’s details before being issued and should not be reused for another client (we understand that some agents have received forms that do not appear to be pre-populated).
Given the very short time in which returns must be filed, it is advisable to request the paper returns as early as possible in the process, ideally in advance of the sale. We understand that HMRC may ‘stop the clock’ (ie, pause the 30-day count from the completion date to the submission and payment deadline) during the period between receipt of a completed paper return and the issue of the payment demand so that the taxpayer is not penalised for any delay in HMRC processing the return but the exact details of how this works are unclear.
Issues with the process
The functionality to amend returns was released by HMRC on 14 October 2020 making it possible to correct returns that have been filed.
Where a non-resident does not have a national insurance number or unique taxpayer reference (UTR) there is an alternative process to enable the creation of access credentials. The alternative sign-in process requires only an email address (validated by a code sent by email shortly after entering the email address) and the address of the UK property. This alternative process is accessed at the ‘Create sign in details’ in Step 1 above.
HMRC updated the system in September 2020 to fix an issue that was preventing non-residents from being able to access the system.
We understand that the system will not accept zeros for tax payable which will often be the case for non-residents.
More than one acquisition date
Members have reported that the system is unable to accept more than one acquisition date and also does not allow for part of the gain to be calculated on uplift from 5 April and part from market value post 5 April 2015.
UK trusts fall within the new reporting rules and trustees may need to report residential property disposals within 30 days of completion if there is CGT to pay.
HMRC has confirmed that a trust will need to register on the Trust Registration Service (TRS) in advance of reporting the property disposal so it can provide either a UTR or a Trust Registration Number as part of the CGT reporting process. The main issue is one of timing, as trustees would usually have more than 30 days to register a trust on the TRS under current rules.
Estates disposing of property also fall within these rules, with personal representatives (PRs) required to report property disposals within 30 days of completion where a gain arises.
When it launched in April, the property reporting service was not available to PRs. This functionality is now available and guidance on how unrepresented PRs can file a return is available, under the heading ‘If you’re a capacitor or personal representative’.
This guidance covers the position where a PR is making the report themselves. They are advised to do this using their own CGT UK property account but select the option to report on behalf of another person. This process is not intended for use by agents. Note that this service allows a PR to file a return and it does not provide online access to view the return or make payment online. The Tax Faculty understands that the return is in fact processed manually by HMRC, who then writes to the PR with instructions on how to pay and grants an extended payment deadline.
It is not currently possible for PRs to appoint an agent for this service. Where an agent is acting for an estate, they should request a paper return.
Informal procedures are available provided that the total tax due under self assessment (ie, CGT and income tax) for the entire administration period is under £10,000, the estate is under £2.5m and the value of assets sold in any tax year are under £500,000. The idea is that this informal approach is simpler and more cost effective than completing tax returns for the period of administration.
It is possible for an estate to make a property disposal such that it remains within the informal procedures (so no need for self assessment or a UTR) but still be within the rules for reporting and paying CGT within 30 days on a UK residential property disposal. HMRC has confirmed that such an estate can still benefit from the informal procedures and will not be forced into self assessment as a result of the CGT reporting requirements.
In these cases, a PR reporting on behalf of the estate would create a CGT UK property account in their own name using their own credentials. Once logged into their account, they will be able to file a CGT return on behalf of the estate, by providing personal details for the deceased which could (but does not have to) include the deceased’s UTR. When the estate pays the balance of CGT and income tax for the administration period through the informal procedures, the PRs will need to quote any reference numbers relating to the earlier CGT payment to enable HMRC to link the payments. This may include the PR’s CGT UK property account and care will be needed if the PR has also reported gains made in their own name. As noted above PRs cannot appoint an agent for this service and this process is likely to cause difficulty for professional PRs.
In the August 2020 Trust and Estates newsletter HMRC notes that if the estate opts to finalise its wider tax affairs (ie, files a self assessment return or makes a report under the informal procedures which includes the CGT on the property disposal) within 30 days of completion of the property sale, there is no need to report via the CGT UK property account at all. This may be of benefit in those cases where the property sale occurs just before the estate administration is completed.
Self assessment tax returns
Gains reported through the new service must also be reported on the taxpayer’s self assessment tax return. However, a taxpayer that is not otherwise required to file a return will not have to do so if all gains have been reported through the new service.
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