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Penalties for late filing and payment CGT

Penalties re late filing and late payment CGT on UK Property new reporting regime

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Client has just sold a rental property and we are looking at preparing the 30 day CGT return.

The CGT is likely to be around 10,000.

Client's preference is just to wait until early May and include it on his normal tax return and pay the £100 fine.

Is it okay to do this and just put it on the annual SATR or will HMRC still expect the CGT return as well.

Reading HMRCs guidance it seems that so long as the CGT is reported and paid within 6 months then the only penalty will be the £100 penalty for not doing the CGT return within 30 days (plus some interest on the CGT payable). Is that correct? (There are no daily penalties if 90 days late as with self assessment and no 5% payment penalties so long as the CGT is paid within 6 months pof completion of the sale).

Replies (14)

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By Wanderer
04th Mar 2021 13:16

Establish:-
1. Date of completion.
2. Date the SA return will be filed.
Then have a read through this:-
https://www.accountingweb.co.uk/any-answers/cg-reporting

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Stepurhan
By stepurhan
04th Mar 2021 13:36

I would be wary of any client with a "preference" to ignore the rules, even if they accept they will get a penalty for doing so.

What other things will they prepared to ignore for their own convenience?

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Replying to stepurhan:
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By SXGuy
04th Mar 2021 14:49

Probably accountant fees.

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By DaveyJonesLocker
04th Mar 2021 13:40

Any client asking me to ignore the rules for his own benefit is quickly an ex-client

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Scooby
By gainsborough
04th Mar 2021 14:54

In any case, as Wanderer pointed out in the link, if completion date has already passed the separate CGT form would be due before the 20/21 tax year ends anyway. Therefore, the exception in the legislation would not apply as the CGT form deadline is before the tax return is submitted.

Normally, I would agree whole-heartedly with the above posts but given the complete shambles of the system, I can understand why a client would be willing to put up with £100 penalty and interest to save themselves the tearing out of hair experience! I am still waiting for payment refs for paper forms sent in January.

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By ireallyshouldknowthisbut
04th Mar 2021 15:09

That is as they say a really cunning plan which had not occurred to me.

I am now charging £250+VAT to file one or £300+VAT for a mirrored pair, and losing money doing so given the level of hassle it is.

id probably only charge £100+VAT extra as part of the tax return, and For a £100 fine, or even 2*£100 its well worth doing with the SA within 6 months if the client is ready with their data. You could always revise the SA before end of Jan too if you needed to.......

I like it, I really do.

In contrast to the above comments I would say my job is to ensure my client pays the right amount of tax in the most efficient way. If incurring a £100 fine is more efficient than paying me to do the 'right' thing, so what if they are fully aware of what was expected of them.

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By richard thomas
04th Mar 2021 17:25

If you can't manage to take advantage of the "file the SA return within 30 days of completion" loophole, be aware that there's nothing in the legislation or on HMRC's website that I can see that stops them charging the 6 month and 12 month penalties for not filing the CGT return (and on your figures this will be £500 each) or the non-payment penalties (also £500). The only reason they don't charge daily penalties is that they can't.

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Replying to richard thomas:
By ireallyshouldknowthisbut
05th Mar 2021 09:34

I thought the legislation said you needed to file "a return" not necessarily HMRC's online form. The full return is certainly "a return"

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Replying to ireallyshouldknowthisbut:
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By richard thomas
05th Mar 2021 13:17

Your are right in one, limited, sense. The legislation does say, in paragraph 3(1) Schedule 2 FA 2019, that a person “must make a return”. The section 8 TMA (full) return is indeed certainly a return. But to draw from your two undoubtedly correct statements the conclusion that a full return containing the gain in question suffices to oust the need to file a CGT return and pay the tax within 30 days completely ignores the context of the rest of Schedule 2, even in a case where the a full return is filed within 30 days of completion.

The obvious place to start is paragraph 5. This is the rule containing the “loophole”, as fawltybasil labels it, allowing a person to not file a “return under this Schedule” if, within the relevant time, the person “has delivered to an office of Revenue and Customs the person’s ordinary tax return containing a self-assessment that takes account of the disposal”. By paragraph 17 “ordinary tax return” means a return under section 8 or 8A TMA.

The CGT 30 day return is clearly what is meant by a “return under this Schedule” because it is contrasted with an “ordinary tax return”, so that in the very limited case, an ordinary tax return that self-assesses no less than the CGT that would be payable under the Schedule does take the place of the “return under the Schedule”. But they are clearly two different things: one cannot substitute for the other in any circumstances beyond the limited case. Fawltybasil would not be correct to describe paragraph 5 as giving a loophole if in all circumstances, not just the very limited ones set out in paragraph 5, a person could move the payment date to 31 January in the year simply by filing an ordinary return in place of the Schedule 2 return. He is however, correct.

Your interpretation, if I have understood it correctly, would certainly frustrate the intention of the legislators which is to advance the date on which HMRC receives CGT if it is payable on the disposal. That that is the policy intention is shown from the fact that a disposal with lead to no tax is not one that gives rise to an obligation to make a return (paragraph 4).

Further, paragraph 16 provides that a return under the Schedule must contain the information specified by an officer of HMRC and must contain a declaration of truth. That would duplicate the provisions of s 8(1)(a) and (2) TMA, and suggests clearly that they are two different things.

And it is not mandatory to file a return under the Schedule online: it may be done on paper.

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Replying to richard thomas:
By ireallyshouldknowthisbut
05th Mar 2021 18:25

thanks Richard for your detailed musings on this rather niche question. I imagine there will be a long string of tribunal cases in this area in due course for people who never file the retched thing, but have filed their tax return and paid all their taxes.

I wont cry too many tears over the legislator's intentions given its such an imposition to the tax payer all to mildly accelerate the tax payment and creating not insubstantial time and cost. I think everyone would be happier all round to take £1,000 off the CGT allowance than muck about like this. If you speak to HMRC the staff are livid over the whole thing as its generating a lot of effort their end to facilitate the poorly designed systems.

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By Duggimon
05th Mar 2021 08:57

I guess I've just been lucky, the three I've had under the new system took about 15 minutes all in, once the figures were assembled.

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By soundadvice
07th Mar 2021 13:25

Thank you for all the useful feedback greatly appreciated
My conclusion is that
1. The CGT return does have to be filed even if a SATR is also prepared; the filing of the SATR does not relieve the tax payer from the responsibility to file the CGT return. Both have to be filed if there is a taxable gain (except if the tax payer only has a taxable CGT gain and does not normally do a SATR in which case they only have to do a CGT return).
2. If the CGT return is not filed there are £100 and then £300 penalties (if it is really late).
3. There are no daily penalties for late filing.
4. There are no penalties for late payment of the CGT after the 30 days only interest charged at 2.75% unless of course it is not paid before February 28th 2022 in which case a 5% payment penalty kicks in.
Hope I've understood correctly

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Replying to soundadvice:
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By richard thomas
08th Mar 2021 09:42

I agree with 1. (subject to the "loophole" when an SA return is filed before the date for filing the CGT return), 2. (but note there are 2 penalties both of a minimum of £300 and a maximum of 5% of the tax*) and 3.

As to 4. there are only late payment penalties if an SA return is not filed (see Item 3B in Table in para 1 Sch 56 FA 2009) and the penalty date is 2 March (30 days after 31 January).

* and the second one could be increased if HMRC though there was a deliberate failure.

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By AlgernonB
10th Mar 2021 13:57

The client may feel this way, but I'd never encourage them to ignore the rules and just slam it in the next Tax Return. This course could easily flag up a Tax Return for a future enquiry, which the client will blame you for. S/he will also blame you for the £100.00 fine, even though they decided to incur it instead of doing the declaration at the proper time. Do the calculation, negotiate HMRC's CGT declaration online worm hole, and bill the client promptly. They'll only have one thing to grumble about, then.

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