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CGT enquiry window - no SATR

What's the enquiry deadline for a CGT return but no SATR

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Hi all.

I would be interested to know the enquiry deadline for a CGT return made but no SATR required.

I understand that if a SATR is filed then the enquiry deadline for that return, and the disposal already reported would be contained in this, would be the usual 12 months from the date the TR is filed.

However if no TR is required I believe that it is assumed that a TR has been filed on the normal TR filing date, and therefore the equiry window  is the LATER of:

12 months after the CGT return filed, and

12 months after the normal filing deadline

FA2019 Schedule 2 para 20(3)

As an example:

Filed CGT return 30/9/2020, no TR required, HMRC have until 31/1/2023 to open an enquiry.

Filed CGT return 30/9/2020, files TR 30/9/2021, HMRC has until 30/9/2022 to open an enquiry

The first example sees a lengthy enquiry window.

Do you agree the time limits are correct?

Thanks,

Replies (19)

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Ivor Windybottom
By Ivor Windybottom
24th Sep 2020 14:06

Failure to notify?

Surely if there is CGT paid on the 30-day Return then an obligation to notify chargeability by 5 October following end of the tax year arises, and failure to do that will be the Revenue's initial route into an enquiry.

I have not looked whether the filing of the CGT Return constitutes a notification for this purpose, so it may be worth looking into that, too.

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Replying to Ivor Windybottom:
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By Mister E
24th Sep 2020 14:47

The disposal would be 2020, so 20/21. No failure to notify as being made within 30 days.

Not sure you have got the right end of the stick.....

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Replying to Mister E:
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By richard thomas
24th Sep 2020 15:03

That is not the notification Ivor was talking about.

Where a CGT return is made, showing as it obviously must, that tax is due, then if that remains the position at the end of the tax year (it might be different because of eg subsequent losses in the tax year) and no notice to file has been issued, s 7 TMA applies (see para 18(1) Sch 2 FA 2019) unless CGT liability is notified by 5/10/21, and Sch 41 FA 2008 penalties will apply.

Not making a CGT return within 30 days of completion is not failure to notify, it is failure to make a return on time and opening you up to Sch 55 and 56 penalties for late returns and late payment. Since no notice to file is required before the obligation to make the return arises, there is no question of failure to notify a CGT payment on account.

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Replying to richard thomas:
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By unearned luck
24th Sep 2020 23:31

Surely there is only a requirement to notify if the final CGT liability is greater than the provisional one in the CGT return? If the final tax is the same or lower there can be no breach of s7. Isn't that is what para 18 says?

More generally, the notification period in s7 commences after the tax year has ended, so people notifying HMRC that they have made, say, a non-residential property gain when it is made (lest they forget to do it later) haven't discharged their duty. It seems odd to me that should be the law.

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Replying to unearned luck:
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By richard thomas
25th Sep 2020 09:59

You are right. It is only if there are other chargeable gains not within the scope of a 30-day CGT return, or the CGT on the returned gains turns out to be more than returned that s 7 TMA still applies.

I agree also with your final para. But HMRC may take that as a cue to send a notice to file. But if they don't and no further notification is made and CGT is due and HMRC pick up the point after 5/10 in the next year, I doubt if they would pursue the person for Sch 41 penalties.

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Replying to richard thomas:
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By Mister E
28th Sep 2020 09:06

I thought that was the case regarding notification if liability more than the CGT return.

What about amendments to CGT returns.
FA2019 Sch 2 Para 19 applies.
Now correct me if I am wrong but for someone who is required to file a CGT return ,but does not usually file a TR, the position I believe is as follows:
A) if the liability reported on CGT return requires no change, no further action
B) if the liability reported on CGT return is too low (say income more than expected so more HR gain) then a TR has to be filed.
C) if the liability reported on CGT return is too high(say income lower than expected so less HR gain) then a TR has to be filed.

There appears to be no mechanics to amend a CGT return unless something at the time was incorrect, e.g. a estimate valuation was used, or you missed some expenditure.

So a lot of clients will require a TR after the year end where they straddle tax bands. It is a shame the legislation does not permit an amendment to the CGT return to avoid a TR, unless I read it incorrectly,

Interested in your thoughts.

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Replying to Mister E:
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By Tax Dragon
28th Sep 2020 09:59

Straddling rate bands means income is relevant to the CGT charge. If I was HMRC, I'd want an SATR in that circumstance.

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Replying to Mister E:
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By richard thomas
28th Sep 2020 10:30

Paragraph 19 allows for amendments to the CGT return unless an actual return has been required or delivered.

Para 9 allows for the 30-day filing of a CGT loss to take advantage of the para 8 repayment mechanism.

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Replying to richard thomas:
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By Mister E
28th Sep 2020 11:00

I am not sure para 19(2) allows an amendment in all cases:
An amendment is permitted only so far as the return under this Schedule could, when originally delivered, have included the amendment by reference to things already done.

I read that as limited amendments can be made, if the amendment was due to income bands estimate then a TR will be required.
If a Non UK residential CG loss was made post CGT return then a TR would be required. If it is a residential loss a CGT return can be filed and repayment claimed for earlier overpaid CGT.

So in many cases a TR will be required anyway.

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Replying to Mister E:
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By Tax Dragon
28th Sep 2020 11:18

Go back to 2019/20 and a TR would have been required to report the gain. Paying tax based on estimates doesn't constitute a return based on full facts. And straddling rate bands means income is relevant to the CGT charge. If I was HMRC, I'd want an SATR in that circumstance.

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Replying to Mister E:
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By richard thomas
28th Sep 2020 11:48

I agree it may not work in all cases. If at the end of the year too much has been paid on account, and para 9 does not help, then an overpayment relief claim under s 33 & Sch 1AB TMA could probably be made.

Or in the case of a non-residential loss, a claim under s 16(2A) TCGA could be made under Sch 1A TMA outside a return.

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Replying to richard thomas:
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By Mister E
28th Sep 2020 13:06

Thanks both.
Certainly there are mechanics for claiming refunds, etc.
I expect we will see HMRC requesting TRs in a lot of these cases.
Unless no straddling of rate bands (and I agree this happens HMRC likely to want a TR) and the CGT comp is all 'final'.

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Replying to Mister E:
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By richard thomas
28th Sep 2020 17:29

Indeed they might, but they shouldn't and needn't, if a claim is made under Sch 1AB or directly for a loss under Sch 1A. Sch 1A applies to Sch 1AB claims and, where a claim is made, HMRC have two options.

One, they must give effect to the claim by making, in this type of case, a repayment. The fly in the ointment here is that there is no right of appeal against a refusal to repay, only a complaint or JR.

Two, they can enquire into the claim, hold up the repayment and then come to a conclusion which is appealable.

All claims must be for an amount which is quantified (s 42(1A) TMA) and HMRC may require such information as they think they need without the need for a tax return, and if they don't get the information they want they can of course refuse the claim.

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Replying to richard thomas:
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By Tax Dragon
28th Sep 2020 17:40

IMHO the easiest way for a practitioner to provide the information needed is on a form called 'SA100' that they can submit electronically with no covering letter or explanation. I know this is a different point from yours (and indeed my previous one), but... why would you not do this?

And, on a more technical note, if submitting such a form is an option (which, since the advent of voluntary returns, it surely is), then doesn't Case B of Sch1AB block the route you are suggesting?

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Replying to Tax Dragon:
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By Mister E
29th Sep 2020 08:39

I'd agree with this approach TaxDragon.
File a return, "process now check later" and get the refund as a bank transfer in days rather than waiting for HMRC to deal with your letter/claim after 6 months.

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Replying to Tax Dragon:
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By richard thomas
29th Sep 2020 16:34

Forgive my ignorance, but how can you submit an SA100 (with an SA108 of course) online without having what HMRC call "registered for self-assessment" and obtained a UTR (and a notice to file)? Or are you suggesting that registering for SA is what a non-SA taxpayer who has filed a CGT return but wishes to claim a repayment because of changed circumstance during the year should do. What about the following years when no similar CGT problem arises - do you deregister on the grounds that you no longer meet the criteria, criteria which you did not meet to start with?

You can of course send in a paper return, but this seems to require a NINO and a UTR.

As to your point about Case B blocking the Sch 1AB route because of s 12D TMA, I think there are several reasons why that is not the case, including that s 12D is a discretionary provision allowing HMRC to accept or reject a voluntary return, so cannot be regarded as a firm remedy.

But in the end of course it is up to the client and their accountant to take a view on what's best for the client, and if that involves getting into SA then so be it. I have simply pointed out other ways that may be equally effective.

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Replying to richard thomas:
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By Mister E
30th Sep 2020 12:14

I have not personally looked closely at the mechanics of a repayment claim in the absence of a return.
But I'd be pragmatic about it, refund of say £5k, I'd likely register for SA on basis CGT to report and file a return, to just speed up the process of the refund.
A call to get them removed the following year is easy enough.

If refund is say £500, I'd explore the alternative of a claim as suggested.

It also depends on how HMRC deal with such claims, they may issue a form to complete which is easy enough.

I'll cross the bridge after the end of the tax year, and when I have more time to look at the mechanics of a claim outside of a return. If claims are largely down to rate bands a letter to claim sounds simple enough for clients.

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By richard thomas
24th Sep 2020 14:17

Yes, you have correctly worked out the effect of the time limits. So what? Most people don't file returns until much later than 30/9 after the tax year.

HMRC are unlikely to open an enquiry into a CGT return until they know that no tax return is being filed (bear in mind that a voluntary return counts now).

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Replying to richard thomas:
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By Mister E
24th Sep 2020 14:49

richard thomas wrote:

Yes, you have correctly worked out the effect of the time limits. So what? Most people don't file returns until much later than 30/9 after the tax year.

HMRC are unlikely to open an enquiry into a CGT return until they know that no tax return is being filed (bear in mind that a voluntary return counts now).

Thanks for confirming the time limits.
Seems a long time to allow an enquiry, but more the point for me was the enquiry limits should a client ask.

I had thought that HMRC had 12 months from the filing of the CGT return, glad I checked it.

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