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Residential Property capital gains over paid

CGT on residential property sale paid within 30 days but now TR done it is overpaid; refund???

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The client sold a residential property in 2020/21 and declared & paid CGT on the online system within 30 days. Their 2021 Tax Return has been submitted showing the gain as usual and declaring that the gain had already been reported and tax paid (there are boxes for those figures). The CGT is overpaid as the total income in the year was rather less than the estimate. However the self assessment system does not refund the overpaid capital gains tax and now that the 2021 Tax Return is lodged we cannot get back into the online CGT reporting to amend that report. Inland Revenue do not seem to know how we can get the overpayment back. Does anyone out there know?

 

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By David Ex
24th May 2021 16:22

From a random Internet search:

https://www.att.org.uk/uk-property-reporting-service-users-guide#Selfass...

“ ... but where the final CGT on residential property is less than that reported on the property return, this is not generating a refund, and instead the computation is simply showing a nil amount. Members have asked how, in these instances, a refund will be obtained. We have raised this with HMRC and will provide further updates here when this is clarified. What advice we have seen suggests that the property return should be amended, but the reason for the overpayment may not fall within the permitted reasons to make an amendment and urgent clarification from HMRC on the process is needed.”

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Replying to David Ex:
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By Paul Crowley
24th May 2021 16:26

So it is official
HMRC did not plan for this.
You could not make it up, and be believed.

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By Tax Dragon
24th May 2021 16:40

Well the law is clear. FA2019, Sch2, pt2, para19(3)(a) means you can't amend the 30-day return.

So the appropriate mechanism for obtaining repayment is the SA one.

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Replying to Tax Dragon:
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By Hugo Fair
24th May 2021 17:58

Your quoted para 19 (3)(a) seems unequivocal to me ... but refers only to the 'return' not to payments or refunds.
Whereas, although OP starts by referencing the returns made (and impossibility so far encountered in submitting an amendment), the thrust of the question appears to be about how to obtain a refund of the amount overpaid.
We have no idea as to what, if any, joined-up thinking went into HMRC's efforts to support either aspect ... so returns & payments may not be as logically connected as one might expect?
Either way there's a serious generic issue if there's no method available to submit an amendment (so that HMRC's systems eventually hold the correct figures) ... but is it just possible (the last dying embers of optimism here) that they've put in some separate (temporary) process for collection/refunding of 'corrected' tax?

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Replying to Hugo Fair:
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By Tax Dragon
24th May 2021 18:32

The theory (per the law) is that the tax is paid on account (just as you may pay tax on account of your SA income tax liability on 31 January in and 31 July following the y of a).

And the same rules apply re repayment - it's TMA s59-something, or thereabouts.

The long-stop date is 31 January following. Until then, AFAIK(BIMW) repayment is not enforceable. Though obviously in practice HMRC often repays much earlier.

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By ireallyshouldknowthisbut
24th May 2021 18:44

HMRC don't seem to have gotten their heads around the fact that for many tax payers we simply know know how much income they will have until the end of the year.

Moreover there will be a tendency to overestimate income when completing an in year return so the client does not underpay.

Trying to imposing interim payments on an annual tax bill via a different system. What could possibly go wrong?

Given the recurring annual mess that is Class 2 NI after what 5 years now when this should be a simple computation? This ought not be surprise. I am not holding any breath for a workaround that does not involve a large volume of manual work rather than a simple "net off your income tax bill".

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By richard thomas
24th May 2021 21:15

There are two very different things going on here.

1. The law

The theoretical, legal, position is set out in s 59B(1) TMA as amended by para 25(12) Sch 2 FA 2019. Any tax paid on account of CGT liability under Sch 2 FA 2019 is included in the calculation of the balancing payment <> [this is the only way I can add emphasis].

The deadline for HMRC to make the repayment is therefore 31 January 2022, but there are no sanctions (apart from repayment interest) if they don't.

Edit: that is Taxdragon's point too which I only saw after I had posted.

2. HMRC's tax calculations 20/21

I have no way of knowing how the tax calculation that is automatically made when HMRC get the return online is programmed, but it is a reasonable assumption that the online calculation is the same as that set out in SA 110 Notes (Tax Calculation Summary [sic] Notes) which you can use when filing a paper return to arrive at the self-assessment figure on page TC1 of that return.

There are two errors that I can see in the paper tax calculation:

(1) The figure of CGT due in Box G59 in TCSN is said to come from box G56 (CGT charged) less box G57. G57 is the box for "Tax on <> Capital Gains Tax already paid". This is said to come from box 52.4. Nothing on the page says where box 52.4 is, but as two pages earlier the page says that "box X" refers <> to boxes in SA 108, it is reasonable to assume that SA108 is where box 52.4 is, and indeed it is. Box 52.4, you will not be surprised to know, only covers NRCGT paid.

For UK CGT on land disposals, the relevant box on the return is CG10 in the SA108. But that is not mentioned on the TCSN and the figure goes nowhere.

(2) Even if box G57 in the TCSN came from box 10 on SA108, the total CGT due is, as mentioned above, G56 - G57. But the page heading says:

“If any box on this page is a minus figure substitute zero, unless otherwise stated.”

Nothing is stated, so there can be no CGT repayable. This is why the ATT reported as they did.

For NRCGT tax paid on account was intended to be repayable if it exceeded the CGT on the SA, as s 59B(1) included tax paid under s 59AA TMA in the calculation, but would not have been repaid if an online return was made or if a paper return was made and the person faithfully followed the TCSN.

It seems the only way to get a repayment is to make a paper return and put the amount repayable in Box 1 of TC 1 (SA110).

This is exactly the situation warned about by the SC in Tooth, a disjunction between the law and the computer tax calculation.

Is there a remedy for those who have filed already and got a tax calculation that shows no repayment of CGT? The obvious starting gambit would be to amend the return under s 9ZA.

I agree that the NRCGT return cannot be amended simply because the CGT on the SA is less than under Sch 2, and HMRC are wrong to suggest that is the answer.

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Replying to richard thomas:
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By Tax Dragon
25th May 2021 06:51

It's a shame that some beautiful work by the writers of the law (how easy it would have been to have overlooked the need for s59AB, for example)* doesn't carry over to good work by the writers of the software**. (Of course, this isn't just an HMRC malaise.)

*One for the tax nerds***: s59AB TMA reminds me a bit of the even-more-lovely s3(4) IHTA.

**Although from what you're saying this time the error is earlier, with the designers of the pro forma computation. It's frankly appalling that this hasn't been corrected, more than 24 months into the legislation being active.

***It's fair to say you pass Duggimon's Tax Pedantry test (hence nerd not geek) if you enjoy provisions such as these :-)

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Replying to Tax Dragon:
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By Tax Dragon
25th May 2021 07:01

Tax Dragon wrote:

It's frankly appalling that this hasn't been corrected, more than 24 months into the legislation being active.

(Well, not quite, but let's hope that doesn't turn out to be prophetic.)

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Replying to Tax Dragon:
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By The Dullard
21st Jun 2021 16:05

"Recovery" in s 59AB refers to refers to recovery in the TMA 1970, Part VI sense, I think.

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Replying to The Dullard:
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By Tax Dragon
21st Jun 2021 16:57

And surely you are right. (At least, I cannot think of any other sense.)

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Replying to The Dullard:
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By Tax Dragon
21st Jun 2021 17:08

I see now that s59AB was introduced by FA2015 and the footnote says "with effect in relation to disposals made on or after 6 April 2015". My recollection (from my previous contribution to this thread) was that s59AB was as old as an old donkey. I'm not seeing why it's needed for CGT and had not been needed before then for IT. And it seems to me to apply to both.

I've confused myself.

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Replying to Tax Dragon:
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By richard thomas
22nd Jun 2021 11:59

Thanks to Duggimon and Tax Dragon for drawing attention to s 59AB TMA. TD’s last sentence in their post of 17.08 is an intriguing one. There are a number of points to make about it.

(1) Section 59AB is not apparently limited to CGT payable on account, but applies to any “tax”. This is because s 118(1) TMA says “tax” without more means any of IT, CT and CGT. The obvious candidates for inclusion are then amounts payable under s 59A TMA and payable under regulations made under s 59E (large and very large company payments on account). They differ however as what is paid under the s 59E regulations is an instalment of CT (and deemed CT), whereas what is paid in respect of IT is a payment on account of the IT liability, not an instalment of IT, so that only IT is really relevant here.

(2) But against this view that s 59B applies beyond CGT is the commencement rule that Tax Dragon notes. It is for “disposals” after a certain date, which is not at all apt for IT (or CT) provisions.

(3) If it is a CGT rule only, then the question that arises is why is such a rule needed just for CGT.

It is necessary then to look at what the payment on account (PoA) rules do in relation to income tax.

For income tax section 59A TMA makes a PoA payable on 31 January in the tax year and the next 31 July after it. (It is though only payable if a return was made for the previous year unless a s 29 TMA assessment is made).

Failure to pay a PoA by the due date gives rise to interest under s 101 FA 2009 which applies to “any amount … payable to HMRC”, not just amounts of tax.

Failure to pay a PoA by the due date does not give rise to a penalty because PoAs are not listed in the Table in paragraph 1 Schedule 56 FA 2009.

What can HMRC do to enforce payment other than by charging interest? Tax is recovered (ie collected) by using the provisions in Part 6 TMA for collection by action for recovery in the courts (Magistrates, County and High in England & Wales) in accordance with the provisions of sections 65 to 68 TMA. But all these provisions apply only to “tax”, and a PoA is not tax (if it were, s 59AB would not be needed).

It is also instructive to look at the CT instalment rules, appliable only to a large or very large company.

Failure to pay an instalment by the due date gives rise to interest under s 87A TMA by virtue of regulation 7 of the s 59E regulations.

Failure to pay an instalment by the due date does not give rise to a penalty unless failure to pay is deliberate or reckless, when regulation 16 of the regulations can charge a penalty of up to twice the interest. (Note that although CT instalment provisions are listed in the table in paragraph 1 Schedule 56 FA 2009, the relevant item number is not yet in force*)

As to enforcement, there is nothing to disapply sections 65 to 68 TMA to the recovery of instalments of CT, but the HMRC COTAX Manual at COM95000 shows that pursuit of unpaid tax is not undertaken until the final instalment due date, and then only if the liability is known.

If it is the case that s 59AB applies only to CGT and not to IT (or CT) there ought to be a reason for the distinction. What we know about IT and CT is that there is either no legal power to pursue unpaid amounts (IT) or the power is not exercised during the instalment period (CT). The reason for this seems clear. In IT when the return including a self-assessment is made and delivered, the income tax becoming due and payable on 31 January after the tax year is only net of PoAs if they are “made” by the taxpayer (s 59B(1)(b) TMA).

For CT the same applies by virtue of s 59D(1) & (4)(a) TMA.

What then prompted the enactment of s 59AB?

The relevant provisions in 2015 were those in sections 11ZA to 12ZN TMA. Section 12ZE requires an “advance self-assessment” (ASA) of CGT due by a non-resident unless a return under sections 8 or 8A TMA or paragraph 3 Schedule 18 FA 1998 has been requested by notice given before the date the NRCGT was required (s 12ZG).

Where an ASA was required it was to be included in the NRCGT return which became due 30 days after completion of the disposal. The payment on account is also due and payable from that date (s 59AA(1) & (6) TMA). By definition a taxpayer with a liability to pay on account of CGT is likely to be outside ITSA or CTSA (or they would have been within the exclusions in s 12ZG). In that case s 12ZH applied to treat the ASA as an SA included in a return and so (I assume) s 59B(1) applies. That subsection will make a nil amount payable if the amount on account was paid at any time before the 31 January in tax year 2: otherwise the amount in the ASA, so far as unpaid, will become due with all the recovery provisions in Part 6 TMA applicable. This was achieved by the addition of a reference to s 59AA in s 59B(1).

In the unusual case where a notice to file was issued after the disposal** then s 59B will be directly applicable and will achieve the same end.

Thus for NRCGT disposals the same outcome is achieved as with IT, save that where an IT or CT return is required there was no obligation to make a PoA. The CGT will be recoverable from 31 January in Year 2.

Is anything changed following the repeal of the NRCGT rules in FA 2019 and their replacement and addition for residential disposals by residents, apart from the law being in a different place?

As readers of posts on Aweb will know, one difference is that a payment on account of CGT is required from all taxpayers, whether or not they file a return. It is paragraph 6(3) of Schedule 2 which establishes that the PoA is due on the filing date. A taxpayer who has not received a notice to file is not required to notify liability unless the actual CGT due exceeds the PoA (paragraph 18(2)). A taxpayer who is required to make a return must include the gain in the return and can deduct the PoA (if paid) from the IT liability due on 31 January in year 2, the reference in s 59B to s 59AA having been replaced by one to Schedule 2 FA 2019.

Thus the only difference between CGT PoAs and IT PoAs is the maximum length of time between the due date for the PoA and the due and payable date for SA. For IT PoAs the length of time is 12 and 6 months, whereas for CGT it is between 21 and 9 months, on average 6 months longer.

That extra time is the only thing that might have prompted the enactment of s 59AB. Whether HMRC exercise that right in practice I do not know.

* One of my bugbears is the claim by HMRC that the four main penalty schedules enacted in FA 2007, 2008 and 2009 were comprehensive and applied “across [sic] all taxes and duties” to quote the mantra.

For CT for example, Schedule 24 FA 2007 and Schedule 41 FA 2008 apply, but Schedules 55 & 56 FA 2009 do not.

The same applies to indirect taxes, with the addition that some VAT and duty penalties for incorrect returns are still extant despite their partial repeal.

** This might be not so unusual these days when IT notices to file are all dated 6 April but are actually issued over many weeks afterwards. I got mine in May this year.

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Replying to richard thomas:
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By Tax Dragon
23rd Jun 2021 15:33

Thanks Richard. (You said very neatly in one line - "But all these provisions apply only to 'tax', and a PoA is not tax (if it were, s 59AB would not be needed)" what I said very clumsily at 6.51 on 25th May.)

There must be another part to the story somewhere. So it seems you have set us a little exercise to do, to finish the tale.

A non-resident, outside SA, made a gain before FA2019 and made a payment on account of tax as per s59AA. At some point, the amount paid needs to become tax (so that it comes within scope of double tax treaties, apart from anything else). Exercise question: What is that point and what converts the amount paid into tax?

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Replying to Tax Dragon:
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By richard thomas
24th Jun 2021 20:35

I thought I would attempt an answer at the question that you think I was asking.

The position of a non-SA person who has made an ASA is governed by s 12ZH (and s 12ZI for trustees). It’s not an easy read, but I think it (a) makes the person liable to notify chargeability under s 7 TMA (as the disapplication of s 7 by s 7A is negatived) and (b)(i) if a notice is given under ss (6), the ASA is treated as an SA (but the notice can only be given if the person states that the ASA is accurate) or (b)(ii) if no notice is given under ss (6) (whether or not that is because the ASA is not an accurate SA) the ASA is treated as an SA.

The difference between (b)(i) and (b)(ii) appears to be that in the (i) case the deemed SA is treated as made on the later of the date of the NRCGT return and the date of the notice, whereas in (b)(ii) it is 31 January in the tax year following that in which the disposal occurs. At least that is how I read it after one or two cold towels.

But that doesn’t really answer your question which is how a PoA becomes tax which is capable of being credited under a DTA in the state of residence.

That is a really interesting question. If PoAs are not income tax or CGT (as the case may be) then do they become income tax at any point? A return and self-assessment is designed to produce a figure of income tax payable (s 9(1) TMA) which is net only of tax deducted at source, not of PoAs. (We are I think all familiar with the perennial gripe that when you complete a return electronically you are told this figure is what you are to pay and PoAs are ignored.) Your SA account however will show the PoAs and net them against the “tax payable” under s 9 TMA to produce the actual debt, ie the balancing payment. This is the effect of s 59B which establishes the balancing payment actually due as net of PoAs of any description.

It is at the point where s 59B applies that the PoAs “become” income tax because they are payments on account of the income tax payable under s9 (s 59A(2)). And given that s 59AA amounts (and now Schedule 2 FA 2019) are also deducted in s 59B(1) that seems to be when CGT PoAs become CGT.

The interface between s 59A and s 59B is not without its puzzles. What is deducted in s 59B(1) is “payments on account made by [the taxpayer] in respect of that year”. What does “made” mean in the context of a claim or claims under s 59A(3) or (4) (reduction of PoAs) made after at least on of the PoAs and therefore given effect to by repayment (s 59A(5))? To make sense it must be the net amount of each PoA, ie after deducting any repayments under s 59A(5), but s 59B(1) does not clearly say that.

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Replying to richard thomas:
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By Tax Dragon
26th Jun 2021 08:09

Thank you again.

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Replying to richard thomas:
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By More unearned luck
24th Jun 2021 19:50

I too am puzzled by what seems to be a mismatch betwen the law and HMRC's design of the system.

The law requires three steps:

Step 1 - Aggregate the income tax and CGT due (s9 (1)(a))
(Q1 in which box of the return does this sum go?)

Step 2 – Deduct from the sum at step 1 the tax deducted at source (s9 (1)(b)) to arrive at the net tax due or repayable.
(Q2 in which box on the return does this sum go? I note that in cases where there is no NIC or student loan repayments the figure in box 1 or 2 on page TC1 coincidentally give this sum).

Step 3 – deduct tax paid on account (s59B)
This step is not part of the self-assessment; the deduction is made in the taxpayer’s SA a/c or on any statement of a/c issued by HMRC.

It seems to me that any CGT already paid is deducted at step 3 and not earlier.
Yet IRIS deducts the sum entered in box 10 on CG1 from the CGT otherwise due. It deducts the payment from all CGT and not just the tax due on the residential property gain. However, IRIS limits the deduction to the lower of the figure in box 10 and the CGT otherwise due, ie the system does not allow for repayment of any excess payment.

IRIS, presumably in conformity to HMRC’s algorithms, seems to be deducting the CGT payment at step 2 contrary to what the law says! But not always all of it!

So, with respect I disagree with your suggestion to make a paper amendment under s9ZA to reduce the tax due. The amendment should be to increase the SA to that due as if there had been no figure entered in box 10 with credit for the tax being made in the SA a/c. HMRC should be required to credit to the SA record the CGT already paid.

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Replying to More unearned luck:
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By Tax Dragon
26th Jun 2021 07:56

More unearned luck wrote:

HMRC should be required to credit to the SA record the CGT already paid.

(With the slightly pedantic, but nevertheless necessary, correction that by "the CGT already paid", you really mean "the payment on account of CGT",) I can't think that anyone would disagree with you. It's such an obvious thing to do. It seems such a simple solution. And it seems to be the approach that the law requires. That's some hat trick.

And it beggars belief that HMRC adopted any other solution (not that we'd have cared, I guess, if they'd made it work). That's some own goal. (Yes I've switched sides. I often think comments made in here about HMRC are incorrect. On this occasion, fire away - it's mismanagement/incompetence on a monumental scale.)

I guess the reason for it is the people that make gains but don't file SATRs. HMRC didn't want them cropping up on their SA software. Though that's what would always have happened in the past, apparently without breaking anything. Hm. Maybe mismanagement and incompetence is wrong. Maybe it's worse - maybe it's good old fashioned stupidity.

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By Martin B
26th May 2021 16:37

Residential Property capital gains over paid
CGT on residential property sale paid within 30 days but now TR done it is overpaid; refund???

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Replying to Martin B:
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By richard thomas
26th May 2021 16:52

See above.

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By penelope pitstop
21st Jun 2021 15:15

And you lose up to 99p in the tax computation!
Client paid £2,500.98 in CGT through the "Report and pay CGT on Property Income" arrangement. I have input this figure onto the tax return software.
On the tax calculation it rounds the CGT payment down to £2,500.
So if the CGT overpaid ends up being refunded through the SA system, looks like you could lose up to 99p in CGT.
The patch up would be to manually give credit for £2,501 when inputting the CGT paid into the software.
Naughty, but nice!

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By The Dullard
21st Jun 2021 16:29

Use an estimate of nil income in the first place* and you won't have this problem. The actual CGT will always be higher than you've estimated.

*The basis for this, if challenged, is Jones v O'Brien 60 TC 706 (see https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim85005) which applies to all sources of income, which are charged to tax "for a tax year". Won't work for disposals after 6 March, obviously. :)

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By janetsimpkins
25th Jun 2021 08:38

Thanks to all who replied! So just to be clear my client(s) are UK resident. One I lodged the SA Tax Return which did not give 100% of the CGT paid so no refund from that, but after talking to various techs at HMRC they said to amend the CGT Report. We tried that but as soon as you say 'yes I have lodged the SA Tax Return' the system does not allow an amendment. Sigh.
So I tried the other half - no SA Tax Return lodged for him at that point. Yes you can amend the CGT Report and although it acknowledges there is a tax over-payment and indeed indicates it will be refunded, no refund has appeared. Now the CGT system simply shows the reduced CGT paid and there doesn't seem to be any place where you check what was paid and refunded (or not)
Think I will try writing a letter and requesting repayments of the CGT over-paid; probably take months before they reply if ever.

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Replying to janetsimpkins:
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By Tax Dragon
25th Jun 2021 09:07

Most of our CGT-paying clients have other tax liabilities. I've suggested on another of these RPG CGT overpayment threads that, in the agent's shoes, I would advise the client to pay the other liabilities net of the CGT overpayment. No-one told me I was stupid, when I said that.

Be aware that I have not yet had to try those shoes on - no CGT POAs in excess of RPG CGT liabilities as yet - and if the idea is stupid I might find out why when I have to try those shoes on. But at the moment I think they'll fit.

Now, where did I put my prince?

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By Paul D Utherone
26th Jun 2021 17:34

this issue has come up in the HMRC/Agent Forum as topic CGT-11132 and between HMRC & IOG. Apparently "...we understand that guidance on this point is imminent. It's definitely been a topic of discussion!" This was a couple of days ago.

A separate comment in that thread would suggest that, if you are lucky, HMRC technical officers should be able to amend a return and arrange repayment. I suspect that this may need you to be lucky enough to speak with a tech officer who is aware of the issue and that they can do this..

To quote another comment in CGT-11132:

<[Couple of technical points here.

It's correct that the legislation does not allow an amendment once the SA return has been filed (para 19(3) Sch 2 FA 2019). Also, if the pension contribution was not reasonably expected to exist at the time that the tax return was filed, it would not be something for which an amendment would be allowed under the legislation anyway (you need to look at whether it could have been taken into account when the return had originally been delivered, per para 19).

What is allowed is an additional return under para 15 as "matters relevant to the application of section 1I of TCGA 1992 [have] become known" (i.e. we now know that the BRB is bigger than originally estimated). See further up the thread for issues on para 15 returns. Unlike para 19 amendments, there is no block on these returns being done after filing the SA return. However, HMRC have not provided the facility to do para 15 returns at all. They indicated to CIOT that they would accept the filing of an amendment as though it's a para 15 return, as they can generally achieve the same result on the system. Although broadly true, this clearly doesn't work where you try to process a para 15 return after submission of the SA return, as the system doesn't recognise that it's not a para 19 amendment.

I'm astonished at the suggestion that this is in any way "unusual". Virtually every CGT return contains estimated income and available BRB. If any final figures result in the basic rate band available being bigger than expected, there is going to be an overpayment. This seems an extremely simple set of facts to me. As is someone who has a post-completion capital loss, where neither a para 19 amendment nor a para 15 return is an option. The only sensible solution to this is for HMRC to automatically allow credit for the CGT overpayment in c18.59 (whether by amending the SA comp or putting a free-standing credit on the statement of account). This would also mean that HMRC would be following the law in s59B TMA, which provides for CGT payments on account to be offset against BOTH CGT and IT.]>

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Replying to Paul D Utherone:
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By Tax Dragon
26th Jun 2021 19:23

Paul D Utherone wrote:

The only sensible solution to this is for HMRC to automatically allow credit for the CGT overpayment in c18.59 (whether by amending the SA comp or putting a free-standing credit on the statement of account).

Or do what MUL said and basically integrate CGTSA and ITSA. (They've always been integrated until now with no problem. I know I'm like a year+ late to this discussion and I don't doubt it's been raised in here 100 times already, but.... why actually have they added a stand-alone system for administering POAs of CGT?)

Paul D Utherone wrote:

This would also mean that HMRC would be following the law in s59B TMA, which provides for CGT payments on account to be offset against BOTH CGT and IT.

Which observation supports my "pay less IT" suggestion. HMRC would not have a(ny) leg* to stand on to if they challenged it, or sought interest and/or penalties.

*Pardon the (visual) pun.

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Replying to Tax Dragon:
By Paul D Utherone
26th Jun 2021 20:54

Tax Dragon wrote:
.... why actually have they added a stand-alone system for administering POAs of CGT?)

To quote another thread from the Agent Forum regarding the non inclusion of CGT 30 day reporting in the Personal Tax Account (PTA):

"Q - CGT-10033 - HMRC Response - Why isn't the 30-day CGT in the PTA?

A - At the time we were asked by ministers to deliver this policy there was no functionality on the PTA to allow anything as complex as CGT to be included in it . Although HMRC plan to add a CGT function to the PTA account at some time the inherent complexity of the CGT regime will always be a challenge."

Looking good for MTDSA

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Replying to Paul D Utherone:
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By Hugo Fair
26th Jun 2021 22:00

Of course 'technical complexity' is often the cover used for "we can't afford to pay our outsourced developers the ludicrous amount they've quoted to do this" - or simply "don't ministers know we've already got other priorities just imposed on us; quarts into pint-pots and all that".

On the other hand, HMRC have developed (poor pun) such a "can't do" attitude that they often don't even investigate their options properly and go for the 'quick win' offered by 'agile development'. [You can probably tell how much I admire all these management-speak fashionable phrases].

Either way, wholeheartedly concur with prospects for a smooth ride with MTDSA!

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Replying to Hugo Fair:
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By Tax Dragon
27th Jun 2021 08:24

Imho HMRC (or the taxpayer) does seem to have been taken for a ride here. Let's take a step back.

As Richard has explained, the 30-day reporting etc does not change the underlying law. RPG CGT is still part of your PTSA. It still comes into your PTA (you probably don't need me to point out that most of our personal tax clients have PTAs). In short, whatever approach HMRC took, the (liability consequent to the) 30-day return and CGT PoAs had to integrate with PTAs. This is so obvious it's depressing me typing it out.

Two things have happened for taxpayers with PTAs:

1. They have extra PoAs to make on certain gains. But clearly the PTA software can cope with people making PoAs at any time. It can cope with the differences between CGT and IT when it comes to calculating PoAs. It can even cope with waivers of interest on PoAs where late payment is made due to a pandemic, the need which functionality would not have been obvious when the software was designed. Conversely, it doesn't seem much of a step to be able to charge interest on PoAs due otherwise than on 31 Jan or 31 July. (One point here - there's no reason at all in law why you can't use an IT overpayment to pay either CGT or a PoA of CGT. So really interest can only be calculated in the PTA, with all the information fed into it. What's gonna happen instead is HMRC will repay the IT and charge interest on the CGT. How much time will we, as agents, be willing to put into getting that one sorted when it happens?)

Sorry, getting so annoyed by this that I'm getting distracted and nearly forgot 2: The making of the 30-day return itself. I don't believe SATRs are filed direct onto the PTA. Nor would 30-day returns need to be. The PTA software simply needs to be able to cope with liabilities arising other than on 31 Jan and 31 July. (Sorry again, now I'm so annoyed I'm starting to repeat myself! I'll shut up... back to the point...)

That's it. Job done, as far as PTA software is concerned.

Isn't it?

(If so can we, the taxpayer, sue them, the software developers, for telling HMRC otherwise?)

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Replying to Tax Dragon:
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By Hugo Fair
27th Jun 2021 11:40

Apologies if I caused any choking over the cornflakes (other breakfasts available), but don't shoot the messenger.

What you've provided is an excellent overview of requirements that then has to be fed through a series of iterations (the names keep changing but, in essence, a user specification then a technical specification before development and all the testing phases - functional, integration, user, etc).
If the overview is both simple and not integrated with other systems (a specialist calculator say) then those phases can be achieved in hours or even minutes - with an end result within one day and apparently seamless from "I want .." to "Thank you".
If on the other hand either of those criteria are not applicable (and HMRC will always require mass integration because they never carried out the wholesale review and redesign of really old database systems), then each phase can stretch out over time.

So far, so defensive of the software industry ... but the nail in the coffin with the scenario you're focussed on is the addition into this turgid mix of sub-contracted developers and incompetent project managers (HMRC).
Neither of those two parties has any incentive to locate the accelerator ... the former because their fees are mostly time-based, and the latter because if you take long enough then it becomes someone else's problem (and there's no plaudits or bonuses for over-achievement).

Basically, as you keep telling me when considering an OP query, logic doesn't come into it.

In terms of OPs it should (rightly) be based on an understanding of the law (with a nod to guidance if you want to be forewarned as to HMRC's likely attitude) ... which I undermine from time to time with attempts at common sense!
Whereas in terms of HMRC software it is (wrongly) based on what is tantamount to a PFI-style model, without clear ownership of the processes or indeed of the results.

There are some brilliant people within HMRC (much better than competent and who care about what they do and the impact it has on us), but they rarely achieve positions where they can noticeably impact on these issues - and have been known to turn native when they do.

I could witter on for hours on this topic (the way in which simple things are made to sound complex, whilst difficult things are described as simple so as not to worry the minister, and so on) ... but, long story short, you/me (the individual taxpayer) can pick our battles and hope to win the odd one via carefully targeted rifle-shots.
But it's a lot of effort and, if dissipated over a wider range of targets, not usually fruitful (which is why this RTI-scarred individual no longer gets involved in the minutiae of the general MTD wars).

Back on topic. As you've evidenced, this particular 'problem' shouldn't stretch the abilities or budgets of those involved too much (although I'm sure they'll say otherwise), but there are competing priorities (and they do take a rather linear approach to releasing new or updated software) - so I wouldn't hold your breath ... but feel free to blow flames in any appropriate direction!

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Replying to Hugo Fair:
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By Tax Dragon
27th Jun 2021 16:41

Wasn't you made me choke, Hugh. I was struggling to believe Paul's quote:

HMRC wrote:

A - At the time we were asked by ministers to deliver this policy there was no functionality on the PTA to allow anything as complex as CGT to be included in it . Although HMRC plan to add a CGT function to the PTA account at some time the inherent complexity of the CGT regime will always be a challenge.

I mean, I believe that's a quote. I just don't believe the words in it. (Nor the non-solution to the non-problem that was adopted.) And my disbelief caused the choking you observed. I'm better now, thanks.

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