Late Capital Gains Property Report

My client is late in filing a CG Property report - is it needed or should I amend the tax return?

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My client sold a property on 20 Sept 2022,  a fact that I have only just discovered.

They were not advised by their solicitor that a return was necessary and that there was any tax implication, even though the solicitor knew that it was a rental property.

The property was sold with an agreement for the new owner to pay in instalments , like a mortgage, and so I was not aware and I don't believe my client was of the actual sale tax point. I have since seen the contract and discovered that the land registry documents were filed dated 20 Sept 2022. 

My client has declared the mortgage payments for the property as rental income.

I need to go back and amend the 2022/2023 tax return for the rental income and capital gain. Do I also still need to file the Capital Gains Property report? And if so, presumably there will be a late penalty for this?

Replies (19)

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By AlgernonB
08th Mar 2024 16:07

I don't think much of the solicitor who handled this, or your client who didn't mention it to you at the time.
The consideration was ascertainable at the point of sale, and so should have been reported as a capital gain and the CGT paid within 60 days of completion.
You do need to do a late return, and there will be penalties.
Time to politely remind the client that you are his/her best friend as regards financial matters, and if they are in any doubt as to whether something is relevant for tax, to give you the facts before they do anything, rather than 18 months after the event.

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Replying to AlgernonB:
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By Nicky Richards
08th Mar 2024 16:17

I have asked the solicitor if they told the client that a report was due and they have dismissed it saying tax isn't their responsibility.
I honestly think that the client didn't know the tax point of sale as the mortgage payments carried on instead of rent. I only knew something was wrong as I looked on Zoopla at the property price and sale.
I am struggling to find a purchase price as the client was given the property by her ex husband in her divorce settlement.
This is a client I would like to walk away from but I feel I should try to help her.
Thank you

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Replying to Nicky Richards:
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By David Ex
08th Mar 2024 17:55

Nicky Richards wrote:

I only knew something was wrong as I looked on Zoopla at the property price and sale.
I am struggling to find a purchase price as the client was given the property by her ex husband in her divorce settlement.
This is a client I would like to walk away from but I feel I should try to help her.

God helps those who help themselves. Tell the client to get the info from the solicitor who dealt with her divorce settlement.

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Replying to David Ex:
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By WallyGandy
11th Mar 2024 10:02

Hope to heaven it wasn't the same solicitor.... And there will be a "discovery fee" to pay.

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By Paul Crowley
08th Mar 2024 16:29

I had a similar situation
An expat former estate agent sold a let property, using his UK based solicitor to do the legal stuff.
I was not informed until tax return time, being December in his opinion. The expat decided that it was my fault, odd really as I then sent him a copy of the email I sent to all landlords when this came in.
He decided that I should do his next two tax returns for free, I declined the offer. No idea whether it was sorted out correctly.

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By More unearned luck
08th Mar 2024 17:34

1) Unless the solicitor is a source of work for you, eg they recommend their clients to you when tax advice is needed, get the client to report the sol to the SRA. Even if the complaint is dismissed, it might still encourage the sol to be more proactive next time.
2) There is a choice between not filing on paper and filing on paper. The former will destroy any RE that the client may have. The latter would preserve it if the return is filed within a reasonable time of the client becoming aware of default.
3) The solicitor's conduct and the obscurity of the rule may amount to an RE.
4) But why did the client think that the repayments were rent or should be taxed as if they were rent? Did he not understand the deal he had made or was this an accidentally-made-on-purpose error?

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Replying to More unearned luck:
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By michaelblake
11th Mar 2024 11:42

You are assuming here that the solicitors letter of engagement with the client did not say (as many do) that they will not be providing tax advice in relation to the transaction

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By David Ex
08th Mar 2024 17:52

Does the client know they’ll have an upfront tax liability on “instalments” that may be received (if ever) at some time in the future?

Not very sensible.

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Replying to David Ex:
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By Nicky Richards
08th Mar 2024 19:20

I know, it's not ideal.
They wanted to sell to a long term renter who couldn't afford it.
The only saving grace is that it was a small flat and sale proceeds were only £62k.

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Replying to Nicky Richards:
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By More unearned luck
08th Mar 2024 19:49

Is £62K the proceeds for CGT purposes? There was a thread recently that discussed this question and, if I recall correctly, the circs were the same viz: sale to the tenant.

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Replying to More unearned luck:
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By Nicky Richards
08th Mar 2024 19:51

Yes, only £62k proceeds.

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By Cylhia66
09th Mar 2024 07:39

Before I file my clients self-assessment returns each year I send them a questionnaire which they have to fill out and sign.

One of the questions I ask is: • Did you sell/dispose of personal valuable goods (ie art pieces, jewellery, house, shares, crypto assets, etc…)?

I feel that if you don't ask this question you could be missing some essential information when filing their tax return and if you are a tax agent you haven't done a very good job missing out on such crutial information.

I can only recommend you add something along those lines to your procedures moving forward.

Always remember that clients never come forward with their tax affairs. They will only give you the details you need if you proactively ask for them. When you file their Tax return is clearly the time to do so.

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Replying to Cylhia66:
Pile of Stones
By Beach Accountancy
11th Mar 2024 09:58

Just updated my checklist! Houses were already on there, but I have just added art & jewellery...

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Replying to Cylhia66:
Pile of Stones
By Beach Accountancy
11th Mar 2024 09:58

Just updated my checklist! Houses were already on there, but I have just added art & jewellery...

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Replying to Cylhia66:
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By More unearned luck
12th Mar 2024 11:15

"... and sign.". Gosh. The clients know that they will be making a declaration of truth to HMRC why then do you need them to make one to you too?

"Always remember that clients never come forward with their tax affairs." Double gosh. What a low opinion you have of (your) clients.

BTW what is the difference between asking and proactively asking?

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Replying to More unearned luck:
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By Cylhia66
12th Mar 2024 14:21

@More unearned luck

Ooh picky are we?

I like to ask my clients to sign what they declare to me. I feel I'm covering my back by doing that. It might not be completely necessary but it certainly doesn't hurt. I also believe that it makes them think about what they declare more carefully because my questionnaire is easy to read as opposed to the Tax return which they often sign without really knowing what it says.

Grant you I shouldn't say that clients never come forward with their tax affairs. Instead I should say that they don't always come forward. It's not low opinion of my clients, it's simply a matter of fact.

There is a difference between asking and proactively asking. I proactively ask when I'm not prompted by any particular event to ask about something specific. Happy?

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Replying to Cylhia66:
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By Paul Crowley
13th Mar 2024 14:40

What if they tell you stuff on the phone?
Being expected to sign a tax return checklist does seem a bit heavy handed.

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Replying to Paul Crowley:
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By Cylhia66
13th Mar 2024 15:08

@Paul Crowley

If they mention something additonal over the phone or in a separate email I just add it myself to the questionnaire.

Does it seem heavy handed? None of my clients has ever had any issue with this.

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