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30 Day residential property reporting not used

Potential new client was not aware of the 30 day CGT reporting and submitted his 2020/21 tax return.

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On 3 March 2021, a potential new client sold a residential property that he had inherited in the year for £53,000 more than the probate value.  He included the gain on his 2020/21 tax return which he submitted on 29 June 2021.  At the time, he was not aware of the need to set up a Capital Gains Tax on UK property account to report and pay the tax within 30 days so this has not been done.  HMRC have issued a computation showing the CGT payable by 31/1/2022.  They have not, as yet, queried why there were no figures on the Return for tax reported on the Capital Gains Tax on UK property account.

I am not sure what advice to give about this to mitigate any penalities and interest.  A Capital Gains Tax on UK property account cannot be used as the tax return has been submitted.  Should the CGT just be paid ASAP using the normal SA payment method?  Any thoughts appreciated.

 

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By ireallyshouldknowthisbut
26th Oct 2021 12:24

There was a good thread on this last week.

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By Roland195
26th Oct 2021 13:11

See the aforementioned thread where the arguments range from "meh, close enough - see what happens" to "unless this is rectified as a matter of urgency both you are your client face criminal prosecution".

Not that we'll admit it now, but most of us probably thought filing the tax return then paying the CGT part of the liability now then waiting to see was the pragmatic thing to do.

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Replying to Roland195:
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By marcia.bowers
26th Oct 2021 13:46

Thank you both. However, the difference I have is that if he could, the client would file a late Capital Gains Tax on UK property account and pay the tax, interest and penalties. However, this is impossible because the SA100 has already been filed.

The client misunderstood his lawyer and just thought he had to file his SA100 quickly.

I think all I can do is recommend the CGT is paid now using the SA reference and wait and see if anything nasty happens in the future.

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By Matrix
26th Oct 2021 19:38

I would read the other thread and in any case not be giving advice to a potential client. If they have already filed their tax return and it is not possible to file the CGT return then I can’t see which services they would require.

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By Tax Dragon
26th Oct 2021 21:50

I never understand the timings with situations like this. It's taken longer for the taxpayer to seek help since filing the return than the time between sale and submission; there's less time from now to 31 Jan 22 than the length of either of those periods. I always wonder... why now? Has something happened? I always wonder... what did the OP already tell the target?

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Replying to Tax Dragon:
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By Hugo Fair
26th Oct 2021 23:15

"I always wonder... what did the OP already tell the target?"
Methinks your (Freudian) slip is showing - or do you think of all clients as targets?

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Replying to Tax Dragon:
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By marcia.bowers
27th Oct 2021 09:58

Potential client is someone I got talking to at a social event. Until it came up in conversation, he had no idea he had not followed the correct procedure. I thought I might be able to help but I now realise I can't except advise to pay the CGT ASAP. I will not be charging any fee.

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By Justin Bryant
27th Oct 2021 11:08

Why is Basil not here advocating a citizen's arrest or whatever?

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Replying to Justin Bryant:
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By Justin Bryant
27th Oct 2021 15:29

Interestingly I note this "Should they have refused to act? That would be harsh." from this week's Taxation Magazine in the link below re much more reprehensible non-declaration and non-payment of s455 charges, and accordingly no mention or suggestion of anything criminal by the accountant or the client thereto:

https://www.taxation.co.uk/articles/insolvency-family-companies

https://www.bailii.org/ew/cases/EWHC/Ch/2021/2740.html

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By fawltybasil2575
27th Oct 2021 13:37

@ Justin.

I assume that your post at 11.08 was tongue in cheek, and likewise Roland195’s post at 13.08 yesterday.

For the avoidance of doubt, my first post on the previous thread was as follows:-

“I must respectively disagree the vast majority of the responders above, in advocating being complicit in legislation breaches.

Firstly, I fully accept that the Chancellor (and his henchmen) and HMRC have both been severely at fault for (i) the nature of the legislation and (ii) its operation. However, “two wrongs do not make a right”.

Crucially, advising a client to (a) be in breach of the legislation or (b) fail to correct such breach, (i) is unethical and (ii) more importantly, can result in disciplinary action by one’s governing body and/or a claim for negligence by the client.
The stance of “let’s not bother correcting the legislation breach as it might save you some interest and/or avoid the imposition of penalties” is akin to advising a client not to “bother” reporting undeclared income to HMRC as they “will very probably never find out”.

One has to maintain standards of integrity, not sink to a “lowest common denominator” approach.

Frankly, adopting a robust stance towards HMRC, if they seek penalties (by firmly reminding them that the vast majority of qualified property lawyers are clearly blissfully unaware of the new legislation, so it is unreasonable to expect lay persons to be aware of it) should persuade HMRC to abandon pursuit of payment of penalties.
In the unlikely event that HMRC are uncooperative in that regard, I would be almost certain that the FTT would accept penalty appeals (and have harsh words towards HMRC to boot).

Having criticised property lawyers above, I am compelled to say that accountants in practice should have, when the legislation was introduced, taken a proactive line, and circularised ALL clients (for whom one believed did hold, or might hold, residential properties).

Such circular letter, as I have stated in a previous thread, should have asked for full details of property owned by the client (acquisition details, enhancement expenditure subsequently etc.) since such information would be promptly needed in the case of a future sale. That letter should of course also have requested the client to later notify you as and when a property sale was proposed (inasmuch as one might be able to provide advise which would reduce the CGT liability arising from disposal).
The necessity to obtain details of assets held should also have been complied with, at the start, when accepting instructions to act”.

I believe that the above post accurately reflects my views. I made it clear, on another post that, in practice, criminal proceedings were very unlikely, but also emphasised that recommending to a client that they take no action to notify HMRC of their breach of legislation (especially, but not solely, where the client uses the “concealed tax liability” to generate income) could potentially render the accountant exposed to disciplinary proceedings and/or action by the client.

I expanded on that “exposure” by stating that such disciplinary proceedings could arise even where the accountant had acted entirely honourably (one certainly would not be the first member of any governing body who, being entirely blameless, is nonetheless subject to groundless accusations, and suffers financially and psychologically from having to disprove those entirely false accusations).

In simple terms, one frequently, not just in financial matters, but in other matters in life, has to draw equations – where, for example, to take a “financial” example, one owns a property valued at say £250K, one ie best advised (unless one perhaps is the Queen – other rich ladies are available) to effect insurance, at say £250, since the prospect of that property’s being destroyed in fire is too horrendous to envisage - what one should NOT do is to say “there is only a thousand to one chance that this property will be destroyed in fire so I won’t bother insuring it”. Recommending a client not to remedy their breach of legislation, which has resulted in their holding monies to which they are not legally entitled, is akin to recommending the client not to insure a property.

Frankly, and with respect to some eminent contributors on the other thread, I found (at the risk of apparent piety) some of the posts rather depressing.

Basil.

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