CGT residential return - non filing

Client sold a property in January 2023, didn't realise they needed to make a return

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As described above, client sold a residential property which they had been renting out.  The sale was in January 2023.  The first I have heard of it is this week when they sent in the information for their tax return and said 'by the way, my rental income stopped in December'.  Solicitor didn't tell them they needed to do a return, and obviously I didn't either because I had no idea it had been sold.

I guess we now have to help the client make a late return, and they will get a penalty?   Or do we just bypass the separate CGT return and put the disposal on the SA return?

Replies (30)

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By richard thomas
04th Dec 2023 16:29

If you file a late 60-day return, the client might get a penalty for late filing.

If you don't file it, but put the gain on the "SA" return, they might get a penalty for late filing which could be larger, because they will have missed the 12 month point, and so 2 lots of tax-geared penalties may apply instead of one (paras 5 & 6 Sch 55).

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By Roland195
04th Dec 2023 16:41

If you were to register for & file the late CGT Return now, the client will almost definitely receive a penalty.

I have heard of no cases so far where a penalty has been issued after skipping this entirely & including on the tax return but as Richard has pointed out, this could be worse.

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Replying to Roland195:
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By Justin Bryant
04th Dec 2023 17:23

Whatever you do, don't tell Basil that.

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By CJaneH
04th Dec 2023 17:06

It would help if Solicitors would advise that:

A Capital Gains Tax may be due
B That a CGT return may be due within 60days.

Estate agents and solicitors are the first points of professional contact on sale of a property and they should be directing people to accountants.

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Replying to CJaneH:
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By Open all hours
05th Dec 2023 11:42

I believe that solicitors have been negligent in these cases. They are the only ones who know exactly when a sale takes place (estate agent expects and hopes). Time is of the essence in these circumstances and if they do not advise their client accordingly they should pick up the tab.

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By Calculatorboy
04th Dec 2023 18:07

I think its primarily the responsibility of solicitors and estate agents for those clients unrepresented by accountants , ( my existing clients invariably talk to me beforehand so it's not an issue )
And that is why I have never acted for the numerous people who keep contacting me well after the filing deadline , sorry but its not worth the trouble.

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By bettybobbymeggie
04th Dec 2023 19:32

Solicitors don't know anything these days apparently and refer it all to the accountant, including any enquiry about SDLT which again, apparently, they know nothing about. I mean why would they know about it given they don't deal with it every single day of every week of every month. Capital Gains? Never heard of it!

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By Cloudcounter
04th Dec 2023 21:32

It's easy (and perhaps valid) to blame solicitors for not advising their clients about the tax. However, that was eminently predictable from the day that the early filing of such returns was introduced. I contacted all of my landlord clients at the time to warn them of this, and telling them to contact me whenever they were thinking of selling a property.

Sooner or later I'll find that one will forget but it's not happened so far, and of course if they try to blame me I can point to the relevant email.

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Replying to Cloudcounter:
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By FactChecker
04th Dec 2023 23:13

Excellent pro-active practice (although it shouldn't have been necessary with a little joined-up thinking in government) ... but what's the betting that at some point a previously property-less client obtains one (via inheritance for instance) without immediately informing you - and then sells it a few months later in same tax year.

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Replying to FactChecker:
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By Retrocanary
07th Dec 2023 14:46

Presumably there wouldn't be a liability incurred in that space of time.

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Replying to Retrocanary:
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By FactChecker
07th Dec 2023 16:30

In the current market that's possibly true ... but still a gamble.

However it's human nature to use a 'cautious' valuation (instead of a Red Book one) during IHT calcs ... and I've seen many real life examples during the last 15 years where a 6 month 'gap' has resulted in a sale generating a profit of multiple tens (if not hundreds) of £thousands.

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Replying to Cloudcounter:
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By Homeworker
06th Dec 2023 11:33

Cloudcounter wrote:

It's easy (and perhaps valid) to blame solicitors for not advising their clients about the tax. However, that was eminently predictable from the day that the early filing of such returns was introduced. I contacted all of my landlord clients at the time to warn them of this, and telling them to contact me whenever they were thinking of selling a property.

Sooner or later I'll find that one will forget but it's not happened so far, and of course if they try to blame me I can point to the relevant email.

Ditto!

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By JB101
05th Dec 2023 09:52

I've picked up a few clients from solicitor recommendations - some of whom have been late in filing. I've yet to see HMRC raise any late filing penalties - I guess they are not automatically raised so someone from HMRC has to press a few buttons to do this. As nobody seems to be working at HMRC these days, nobody is pressing buttons!

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By AdShawBPR
06th Dec 2023 09:40

I recently took on a client who didn't realise a CGT was due on the sale of a property. Solicitors never told her and when pressed they referred to their terms and conditions saying they don't give tax advice! She did receive a £100 penalty for a late CGT return but this was waived on appeal. From others I have seen, solicitors are not telling their clients about this.

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Replying to AdShawBPR:
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By Software Seeker
06th Dec 2023 12:34

What was the basis of the appeal, out of interest?

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Replying to Software Seeker:
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By AdShawBPR
06th Dec 2023 13:56

I just told HMRC how it all happened which is: The taxpayer (not a wealthy individual at all) has been filing her own straight forward tax returns without fail and on time for many years and she knew she would have to report a gain on the return. She wasn't a client of mine but I know her and she asked me about the CGT entries on her return. I pointed out that she should have completed a CGT Return which came as a complete surprise to her. We did that together very quickly after I pointed out the error. I relayed all that to HMRC and the fact that the solicitor had said absolutely nothing about this. I also told them it was a daft system!

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Replying to AdShawBPR:
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By Software Seeker
06th Dec 2023 14:19

Thanks. So it looks like (although obviously I could be completely wrong), as an unrepresented taxpayer, HMRC took the appeal to mean that there was ignorance of the law and allowed the appeal on that basis. Didn't think that was an acceptable excuse, but (like I say) I could be completely wrong as to why the appeal was accepted.

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Replying to Software Seeker:
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By AdShawBPR
06th Dec 2023 15:39

I agree it does go against the ignorance being no excuse thing but on the other hand there is no law that says a taxpayer must be represented by a professional so while they do then take it upon themselves to know the rules on tax, this is so arbitrary and it has nothing to do with the actual tax calcs themselves. By agreeing to cancel the penalty HMRC would seem to agree that it is reasonable for a taxpayer to have missed this. The flip side is perhaps HMRC are really agreeing it's an unreasonable process!

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By Software Seeker
06th Dec 2023 12:34

Is there, in fact, a CGT liability? If not, no need to file a 60-day report (unless the client is not resident).

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By Software Seeker
06th Dec 2023 12:36

I would advise the client to file the report. As RT has said, by not doing so risks a larger late filing penalty if/when HMRC spot the omission. What have you got to gain by not filing?

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Replying to Software Seeker:
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By Roland195
07th Dec 2023 14:55

From a purely mathematical point of view, you have the certainty of a penalty being issued with an unknown chance of appeal over the potential higher penalty bein issued down the line.

If the original penalty was what you would regard as a considerable amount, it may be worth the risk.

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By SXGuy
07th Dec 2023 16:33

Really annoys me when solicitors don't inform clients of potential returns. I know they're not accountants but as an example, had a new guy come to me with undeclared disposal. Over a year old, not in SA so had to declare via the cgt return.

He's now had to cough up 2 lots of late submission penalties and 3 lots of late payment penalties plus interest totalling over 12k. All avoided with a simple bit of push in the right direction.

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By confuseddotcom
08th Dec 2023 16:48

Thank you for all of the interesting answers. After running the figures, it turns out my client made a capital loss on this property, so no return was due. All's well that ends well.

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By Nebs
11th Dec 2023 09:57

Perhaps our professional bodies could contact the SRA/Law Society and ask them to advise their Solicitors to add this to the list of things they tell their clients.

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Replying to Nebs:
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By bettybobbymeggie
11th Dec 2023 10:12

Top of that list is "Ask your accountant".

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Replying to Nebs:
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By Extravision
11th Dec 2023 10:58

Totally agree- Solicitors and Mortgage advisors should accept some responsibility to advise clients to seek advice from an Accountant about property sales. I know of a recent situation where the client was not even made aware of SDLT being due.

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Replying to Nebs:
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By Graeme Lindsay Abdn
11th Dec 2023 11:32

This point was raised in an ATT webinar earlier this year, or last year. Apparently, HMRC contacted the Law Society, to ask their members to pass a HMRC leaflet regarding CGT Reports to people selling residential property. The Law Society said 'no'! I understand solicitors have changed terms of engagement to say they don't give tax advice. They use this as a 'get out of jail' card in these types of cases. Very poor customer service in my opinion.

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By AdamJones82
11th Dec 2023 13:44

Mortgage advisors are just as bad as a solicitor. Had one who told a client that because their mortgage matched the rent no need to register or pay tax (it was low rent as for a daughter)
Trouble is it was a capital repayment mortgage…..10 years to declare on the late property tax system

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Replying to AdamJones82:
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By Roland195
11th Dec 2023 13:47

So why given this particular example to you suppose that Mortgage Brokers should bear responsibility for advising of potential tax charges?

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