ATT Technical Officer The Association of Taxation Technicians
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How to simplify CGT processes

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The OTS recommends 14 changes to CGT calculations and reporting to make life easier for taxpayers and tax agents, but above all, more HMRC guidance is required, as Helen Thornley explains. 

8th Jun 2021
ATT Technical Officer The Association of Taxation Technicians
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I sat on the OTS consultative committee for both of the OTS reports into CGT, a personal capacity, so I’ve seen this process from the inside.

Second CGT review

The OTS’s first CGT report Simplifying by Design looked at the structure of the tax, and included some controversial ideas around removing the tax-free uplift on death in certain circumstances.

This second CGT report considers some of the practical and administrative issues that advisers and taxpayers must wrestle with on a regular basis. Many of the 14 recommendations are intended to both help to bring CGT up to date and to try to level the playing field for those without the benefit of professional advice. The OTS also calls for improved guidance from HMRC in a number of specific areas.

UK Property Reporting Service

In my role as an ATT Technical Officer, I have received a lot of negative feedback about the UK Property Reporting Service – or ’30-day reporting’ – which launched in April 2020. I know therefore, that many will be disappointed that the OTS haven’t recommended scrapping it.

Alas, such a recommendation was never going to be politically possible. Government accounts are on a cash flow basis so, even though the policy doesn’t change the tax due, removing the measure would count as a ‘cost’ to the Government as receipts already budgeted for would have to be deferred.

Accordingly, OTS have focused on two measures that might help - as Paul Aplin has already discussed. These are:

  • extending the deadline from 30 to 60 days, and
  • requiring conveyancers to help improve awareness by requiring them to provide information about the measure to vendors.

The report also notes the process of agent authorisation for the UK property reporting is complex, access for executors is inadequate or non-existent and what guidance does exist is extremely limited. I couldn’t agree more.

The ATT resorted to writing its own guide to using the service and we are continuing to call for HMRC guidance on key areas including dealing with losses, making amendments and the interaction with self-assessment. This is essential not only for agents but also for the public at large, as the OTS report highlights an estimated 40% of 30-day returns have been submitted by an agent, leaving 60% to be submitted by the taxpayer.

Single customer account 

As one of their longer term recommendations, the OTS propose that HMRC should pull together all three routes for reporting capital gains – self-assessment, ‘real time’ CGT reporting and the UK Property return – into one place, to which agents can be granted access. This fits nicely with HMRC’s longer term digital strategy of a Single Customer Account but is likely to bring additional development costs.

A major problem with the UK Property Reporting Service is that it sits outside both the Personal Tax Account for taxpayers and the 64-8 route for agent authorisation. This is confusing for taxpayers and agents alike, and inclusion in a single digital account to which agents can be granted access would definitely be very welcome.

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Replies (10)

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By David Warren 2905
09th Jun 2021 10:31

The biggest problem with the 30 day rule on Property disposals is that the clients we have who fall into this category are, ahem, older and generally not tech savvy at all. One of ours who is going to be doing this soon still sends us typewritten letters! Yes, such clients do exist. There needs to be a far easier route for agents to be able to make the relevant return on behalf of clients. It can be a real scramble to get things in place in time.

Thanks (6)
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By Homeworker
09th Jun 2021 10:42

Thank you Helen. I wonder why they moved away from the old "structured email" system we had for non-residents before last year? It was much easier to use. Still, it's a shame nothing can be done about the reporting regime, although 60 days, rather than 30 would help, but there has to be a better way of informing vendors about the rules. I have personally spoken to Estate Agents and solicitors in this area, to ask them if they were aware of the changes (but without offering to help - far too much hassle!).
I wonder also how many agents have helped clients to file the reports themselves, as I have done recently.
The short timescale for dealing with no-gain, no-loss transfers in divorce settlements involving taxable property has also been a problem in the past and is well overdue for reform. Couples separating near the end of the tax year are hardly likely to have capital gains on their minds and I have spent several hours for various clients working out what the tax implications of swapping properties will be, so that their solicitors can take it into account in the divorce settlement, and where properties have partial exemption the figures can keep changing, depending on how long it takes settlement to be reached!

Thanks (2)
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By david Rees
09th Jun 2021 10:45

A very useful insight into possible changes in the Capital Gains Tax (CGT) regime currently under review by the Office for Tax Simplification (OTS).

One small complaint, as a non tax specialist, is the overuse of acronyms that are not explained beforehand in the text. By way of Example (e.g) the OTS could refer to many different terms for instance, Officer Training School; Oil Temperature Sensor; or even Over The Shoulder. I accept these would be completely out of context for this article, but a quick search in Google reveals the US Treasury Department, Office of Thrift Supervision, which could be very misleading.

Apart from this pet hate of mine, I do enjoy your articles and find them generally informative and simple enough for a non expert to follow, even if I do have to resort to Google to help with the acronyms.

Thanks (2)
Replying to david Rees:
rebecca cave
By Rebecca Cave
09th Jun 2021 16:31

Good point - I have amended the article to spell out the meaning of OTS.

Thanks (2)
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By North East Accountant
09th Jun 2021 10:51

HMRC's UK Property Disposal Reporting is an absolute farce. It is pathetic.

HMRC want to be the most "digitally advanced tax system in the world"....but they are only fooling themselves.

For example,

HMRC PAYE and NIC records were merged into the NIC and PAYE system (NPS) in 2009 and yet here we are 12 years later and it still doesn't integrate with the SA system.

HMRC are world leading alright..... at being inept.

Thanks (6)
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By Ian McTernan CTA
09th Jun 2021 13:32

So the OTS dodge the most obvious simplification, which is to recommend getting rid of the 30 day reporting system which is a farce, and then proceed to tinker around the edges without really simplifying things at all.

Thanks (1)
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By Hugo Fair
09th Jun 2021 18:58

I don't mean to snipe, Helen, but when you say "I have received a lot of negative feedback about the UK Property Reporting Service – or ’30-day reporting’ – which launched in April 2020" ... do you mean that you (or the wider ATT) have received ANY positive feedback about it?

And whilst I like (most of) the projected recommendations, I don't know why OTS appear to accept that some key procedural aspects (e.g. Single customer account) can only be considered as longer term recommendations.

It might be expensive - but that's what happens when legislation is changed without proper regard to all the impacts. When you have a 'process' that almost certainly fails to conclude satisfactorily more often than not, then the process is not fit for purpose and needs to be changed (more urgently than other IT plans that are desirable but not essential for actual current compliance).

As I said, this is not criticism of you (or ATT or OTS), but it is to put it mildly 'disappointing' that the broken nature of where we are now is not being urgently addressed.

Thanks (2)
Replying to Hugo Fair:
Helen Thornley Profile picture
By Helen Thornley
17th Jun 2021 14:40

Thanks. I can understand your comments on timescales. On the feedback point - taking your question as you intend it - you can safely assume I haven't actually received any positive feedback! Occasionally I do get some neutral feedback - the odd person does tell me that they managed it with their clients and it was all fine. But when I said I had received a lot of negative feedback, I meant in terms of volume. I can't think of another topic where I have I had quite as much from quite as many members.

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Morph
By kevinringer
20th Jun 2021 13:32

The 30-day reporting has created a huge amount of additional work for taxpayers and agents. And if the taxpayer is digitally excluded, it has also created a huge amount of additional work for HMRC: thus the 130-day delay in processing the paper PDCGT. Whilst I appreciate the Government may want the tax sooner, they need to take into account the cost of obtaining that tax. In my case, all my 30-day CGT cases have been digitally excluded so all have had to go the PPDCGT paper route. As at today not a single PPDCGT has been processed by HMRC, so no CGT has been paid (with the paper PPDCGT you don't pay the CGT until HMRC send a paper bill). By the time HMRC issues the bills, the CGT payable will only be paid a hand-full of months before the normal 31 January 2022 payment date. All this pain for a miniscule amount of cashflow gain.

Of course, HMRC could have avoided all this by enabling agents to make the declaration without the clients having to initiate an online process. Though all my clients to date have been digitally excluded, I am not and would prefer to make the declaration online. But I'm forced to go down the paper route because my clients can't authorise me. And in these Covid times and home working, we can't meet the client in the office and go through the authorisation process with them. To date, every client that I've needed to report is already an SA client for whom a 64-8 is in place. The 64-8 covers all personal tax (including SA and CGT) but HMRC have bizarrely refused to accept the authority of the 64-8 for the 30-day reporting. Ironically, when I phone for a paper PPDCGT, HMRC require 64-8 authorisation to release it. And in a final twist of irony, because all my clients are in SA they will need the CGT including in the 2021 Tax Return, yet I can efile the 2021 Tax Return without a 64-8 in place. If I can file SA CGT without a 64-8 (that is all CGT, not just residential disposals), why does HMRC insist on online authorisation just for one tiny part of CGT (residential disposal)?

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Morph
By kevinringer
20th Jun 2021 13:39

Just a thought, most disposals will result in a submission to the Land Registry. I appreciate the Land Registry deals with legal ownership and CGT is beneficial ownership and a disposal of beneficial ownership won't always result in a Land Registry change. But where there is a Land Registry change, and assuming this is done online, the solicitor is authorised to make the Land Registry submission. Perhaps that submission should also initiate the CGT process and at that point give the option to authorise and agent and generate a HMRC reference number. The solicitor would then ping an email to the agent so the agent can then continue with the CGT. If we could cut out the need for digitally-challenged clients to have to initiate the agent authorisation, I feel the 30-day declaration would be a lot smoother.

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