ATT Technical Officer The Association of Taxation Technicians
Share this content
CGT reporting and payment niggles addressed by HMRC
iStock_Register closed_kameleon007

Capital gains reporting SNAFU eased by HMRC FAQs

by

​HMRC issued new guidance on the operation of the UK Property Reporting Service. Helen Thornley highlights the key points and where further areas of uncertainty need addressing. 

16th Jul 2021
ATT Technical Officer The Association of Taxation Technicians
Share this content

The problems surrounding capital gains tax (CGT) repayments covered in my last article included an HMRC workaround on what to do when a repayment of CGT from an earlier property report arises on completion of a self-assessment return. In these cases, taxpayers will have to ring HMRC to get the overpayment offset against other self-assessment liabilities - or repaid if appropriate.

HMRC’s new FAQ document (which is not yet on gov.uk) confirms that the position is similar if a repayment is claimed via the property reporting service. There is no option to enter bank details on the UK property return and any credits will remain on the account until the agent/taxpayer contacts HMRC for repayment.

It appears that CGT repayments will only be made automatically via the property service where the initial payment was made by credit or debit card. In those cases, HMRC will send refunds back to the same card.

Estimates and amendments

Since property reports are made in-year, before all the facts relevant to the individual’s capital gains tax position are known, many property returns will need subsequent adjustment and agents need to know the correct approach.

My previous article outlined the rules around when it is permissible to update estimated figures or make other amendments to a property return and when these changes have to be reported through self-assessment. While HMRC’s new guidance picks up some of the issues, it doesn’t cover in detail what the relevant legislation actually permits taxpayers to do. The ATT have fed back our concerns and I understand more guidance is coming in this area.

Points to note

In the meantime, tax agents should note that:

  • If the taxpayer uses estimated figures on their property return, HMRC will not issue a reminder after submission to suggest they might wish to update the report with final figures.
  • Provided reasonable estimates were used – and flagged as estimated figures on the return – HMRC will not charge interest on underpayments which might arise when final figures are provided.
  • It is not possible to update a property return once a self-assessment return containing that disposal has been submitted.  

After death  

The ATT is often asked how tax agents should report property disposals for deceased persons – ie disposals made out of their estate. Since it is not possible to create a property account for a deceased person’s estate, the ATT advised that the only route for the agent to report is via a paper form.

However, since anyone with a property account has the option of reporting on behalf of another person, HMRC are now highlighting that it is possible for the executor to use their own, personal property account to report the disposal by the estate, and appoint an agent to do this via the usual digital handshake.

There are some caveats to this approach which are flagged in the HMRC guidance:

  • The agent will be able to see any reports of disposals made personally by the executor.
  • Appointment of the agent for the estate will displace any agent previously appointed for the executor’s personal affairs.

Digital reporting for an estate will therefore only be suitable where the agent also acts for the executor in a personal capacity. Where the executor is a professional such as a solicitor, then the paper form will probably remain the best approach.  

System development

Due to the large number of issues that have arisen since the launch of the UK Property Reporting Service in April 2020, many ATT members have asked how the service was tested prior to going live.

The system was piloted in 2019 and I and a number of other ATT volunteers took part in user testing. However, that testing didn’t cover the digital handshake – which has been the source of most complaints – as this was outside the control of the team developing the service.

We also weren’t able to test the system for receiving payments. Instead we mainly commented on the nature and content of the form itself – and not all our feedback has been reflected in the final design.

More testing of the process of interaction with self-assessment would clearly have been beneficial, although I suspect that testing the interaction of new services with existing, live services, is a challenge too far for HMRC’s developers. It was impossible for our volunteers to test that part of the system with taxpayers willing to report and pay within 30 days before the rules came into force.

While tax agents currently struggling with the system might feel otherwise, HMRC does take user research seriously. The department has a large team of user researchers who borrow heavily from approaches used in psychology/social science studies.

But volunteers can only respond to the scenario put in front of them. The ATT suggested it would be helpful if those in practice could comment on the range of scenarios being tested. We also think more focus needs to be placed on working with volunteers on how they think any new system might fit into their day to day practice processes or interactions with clients.  

Where next?

HMRC is continuing to work on updating all the guidance on the UK Property Reporting Service as well as exploring a longer-term resolution to the offsetting of overpayments issue.

For any issues which have not been addressed in HMRC’s new guidance, I’d encourage you to raise comments and concerns about the system on the Agent Forum and/or raise them with your professional body. Alternatively, please leave comments below and AccountingWEB will forward them to HMRC.

Replies (23)

Please login or register to join the discussion.

avatar
By Winnie Wiggleroom
17th Jul 2021 10:38

"The department has a large team of user researchers who borrow heavily from approaches used in psychology/social science studies."

Oh dear!

Not really sure why you feel the need to defend HMRC, the fact of the matter is that all HMRC need to do is ask an actual practice accountant what needs to happen to make this work in practice, you know the people that actually do this work day in day out, and then listen to them.

It does not need a whole team of people that are qualified in social sciences! And forget asking the PBs, just get a panel of practice accountants, I personally would offer my time willingly

Thanks (20)
avatar
By Hugo Fair
17th Jul 2021 14:08

"But volunteers (within 'user research') can only respond to the scenario put in front of them" ... and that sums up the whole problem. HMRC suffers from a fatal combination of "we know best" and unquestioning adherence to pre-conceptions - which they see as needing to be defended rather than as a means of opening a dialogue.

I have been one of those volunteers, but was asked to leave when I kept pointing out that a) those questions were imprecise, but b) they were anyway asking the wrong questions.
They are never interested in improvements (even those that will save the HMRC 'body' time and/or money) ... only in not admitting to personal guilt/failure (which is how they're taught to interpret any admission that there might be a better way)!

Thanks (15)
Replying to Hugo Fair:
By ireallyshouldknowthisbut
19th Jul 2021 10:14

@Hugo, I have had similar issues when trying to give feedback.

I would give a long detailed response to a question and they would pause, and say "shall I put that in as a yes or a no"

I am no longer on the list.

Thanks (5)
My photo
By Matrix
17th Jul 2021 17:14

So if the figure change then do you need to revise the CGT return before filing the tax return?

Thanks (0)
avatar
By richard thomas
18th Jul 2021 15:01

What I doubt about FAQ3 is the last paragraph (reflected in your second bullet under “Points to note”). Why should the fact that the taxpayer did not tick the estimates box mean that interest must be charged (presumably from the original due date).

I have responded to matrix’s post in another thread “Interest payable on underpaid CGT?”

Thanks (0)
By SteveHa
19th Jul 2021 07:58

Fiasco. The more HMRC digitise, the more the fiasco increases, with disparate systems not capable of talking to each other, and even HMRC staff prevented from talking to each other to resolve issues.

It's about time that they went back to the drawing board and developed a digital tax system that is joined up and fit for purpose in the third decade of the 21st century, rather than keep trying to bolt stuff on to a more than 20 years old system.

The "Most digitally advanced tax in the world"? It's not even the most digitally advanced tax in my living room.

Thanks (11)
avatar
By flightdeck
19th Jul 2021 11:39

FGS. This is just amateurish.

Firstly they never had (or put into the "too hard" bucket) the requirements for dealing with under and over payments which is not some rare edge case as quite obviously any mid year submission is highly likely to be moderated by what happens in the rest of the year. So they did a crap job of gathering requirements.

However, I think they probably DID identify this requirement (as it is blatantly obvious, even a junior analyst would spot this) but I suspect that, due the accretive [***] in their fragile menagerie of systems, it is now actually and genuinely too hard to any integration. So they decide that all they would do is stick on a new silo system on the side.

"HMRC does take user research seriously. The department has a large team of user researchers who borrow heavily from approaches used in psychology/social science studies." This is one of the funniest and most anger-inducing things I have read in a very long time.

Thanks (6)
avatar
By Ammie
19th Jul 2021 11:55

In my mind it is clear what HMRC's incentive was and will also be with MTD for Income Tax. Push the legislation through to give effect to the requirement to file and pay at short notice, (nice quick cashflow), and look at any issues later.

Why cannot the adjustments simply be made via SA and why does any repayment need chasing? Another "fine mess, Stanley".

Unravelling digitalisation problems is becoming extremely difficult and costing hours of non chargeable time which would be difficult to justify to the client. HMRC staff more often than not haven't got a clue and emails that take days for reply, if you are lucky, are just generic and rarely solve anything.

Thanks (1)
avatar
By TASG
19th Jul 2021 12:10

I think I may have discovered 2 more problems with the system which aren't recorded elsewhere.

1) Non residents

If you fill in a NRCGTR for people who live abroad but have been assigned a UK UTR and NINO then they have to provide a UK address. The only hack around it is is to say the taxpayer doesn't have a UTR and NINO.

2) Completion dated in the future

The system won't let you enter completion dates in the future, which would be handy.

3) Signing up process: not a bug but horrendous

The signing up / 'digital handshake' process is a complete disaster, especially for the over 70s. Agents really ought to be able to register their clients, perhaps with the old security code through the post method of authentication.

It follows that the 30 day timetable is frankly unreasonable.

Urgent repair work needed.

Thanks (2)
Replying to TASG:
avatar
By Winnie Wiggleroom
19th Jul 2021 13:28

TASG wrote:

3) Signing up process: not a bug but horrendous

The signing up / 'digital handshake' process is a complete disaster,

Of all the things, this is the one that angers me the most - you have existing authority from the client for Self Assessment, there should be no need for an extra signing up process at all, the ability to file the report should automatically be available to the existing registered agent.

Thanks (6)
avatar
By dross5
19th Jul 2021 12:22

Thank you for that Helen. It has been interesting getting to know this system and trying to use it in practice. Perhaps the biggest issue we find is getting the client signed up for their own account in the first place - this usually needs a fair bit of hand holding. I had one experience where we asked the client to sign up for their own account before going any further, and they simply decided to go elsewhere as they were finding that bit too hard. However, one problem that I repeatedly come across is that HMRC think clients have a NI driving licence when they don't (they have a GB licence) which cuts down the options for identification. In my experience clients routinely fail the credit check questions as they can't remember when things happened. So you are left hoping HMRC ask for a passport and P60 (which often aren't given as options). I am wondering how to feed back to HMRC about the NI driving licence issue.

Thanks (3)
Replying to dross5:
Helen Thornley Profile picture
By Helen Thornley
20th Jul 2021 12:26

Thank you. I think every member who has fed anything back to me on any aspect mentions the digital handshake. We (as in all the prof bodies, not just ATT) are all pushing for something that is actually usable. There's no way I'd have got my previously, largely elderly client base through it remotely - and even if I had managed, I'd have worried about them saving IDs and how to persuade them of the merits of a secure password.

As for the NI driving licence that is a mystery to me too. It has been raised but I can't lay my hands on what came back at the moment. If I can track it, I'll post here.

Thanks (3)
avatar
By Ajtms
19th Jul 2021 13:01

Thanks Helen for your continued advice. I still cannot comprehend why HMRC does not employ somebody like you or one of us with all our years of experience and instead employ inexperienced and unqualified people. I keep asking myself why we all know what we are doing and HMRC don't. I note from your above advice that "It appears that CGT repayments will only be made automatically via the property service where the initial payment was made by credit or debit card." That being the case, then I have to ask why HMRC did not make this very clear before 6 April 2020 so that we could have advised our clients to pay with a card rather than by internet banking? Where was HMRC's own advice to their "customers" on this point too? Where a taxpayer makes a second property disposal then the law at s8(2) of sch 2 FA2019 says the refund will be made on the day that the second (or third etc) return is made. The law therefore effectively requires the process to be automated to issue the repayment on the day that the return is lodged and says nothing about card payments so it is clear to me that HMRC have broken the law. It is a shame that this "large team of HMRC researchers" could not have fed back to the system designers before this diabolical system was released. Is it not time for HMRC to hold those incompetent system designers to account? They alone are responsible for tens of thousands of hours being wasted with HMRC staff, taxpayers, the profession and the professional bodies all to collectively save about £100 in Bank of England interest charges.

Thanks (1)
Morph
By kevinringer
19th Jul 2021 13:27

Thanks Helen. Very helpful article.

'We also weren’t able to test the system for receiving payments. Instead we mainly commented on the nature and content of the form itself – and not all our feedback has been reflected in the final design.'

HMRC has professional bodies and agents willing to give up their time (free of charge) to test HMRC's systems and make recommendations. Given that our experience vastly outweighs HMRC's IT people, why doesn't HMRC accept everything we say and act on it? Almost always what we say will save time for HMRC as well as agents/taxpayers, and at the end of the day HMRC often have to change their systems to do what we said needed doing at the outset. It would save HMRC resources if they just got it right in the first place instead of having to weather the storm for a year then fix it after it has gone live.

Thanks (1)
Replying to kevinringer:
avatar
By Hugo Fair
19th Jul 2021 13:35

".. and at the end of the day HMRC often have to change their systems to do what we said needed doing at the outset. It would save HMRC resources if they just got it right in the first place instead of having to weather the storm for a year then fix it after it has gone live."

Aaah, but by then fixing it is "someone else's problem innit"!

Thanks (1)
Morph
By kevinringer
19th Jul 2021 13:29

Regarding testing, HMRC should not use volunteers at all because they are not representative of HMRC's 'customers'. Volunteers will usually be tech-savvy and willing to engage with HMRC. HMRC should ensure pilots include the full range of 'customers' including the digitally-excluded, the digitally-challenged and those who are reluctant to engage with HMRC.

Thanks (2)
Morph
By kevinringer
19th Jul 2021 13:35

Helen, I'm interest in:

'However, since anyone with a property account has the option of reporting on behalf of another person, HMRC are now highlighting that it is possible for the executor to use their own, personal property account to report the disposal by the estate, and appoint an agent to do this via the usual digital handshake.'

My biggest problem has been getting clients to do the digital handshake. To date I have had 0% success. In non-Covid times I could get the clients into the office and both of us sit in front of a computer and work through it together. Can an agent, with their client's permission, use the agent's personal tax account to report the disposal and appoint the agent?

Thanks (0)
Replying to kevinringer:
avatar
By Tomazaan
19th Jul 2021 14:30

What I have found works well is a Zoom call with me sharing my computer screen. I then complete the various bits that the client has to do under the direction of the client who can see what I type and respond when asked for codes which are sent to the client's phone or email account. Of course, this requires the client to be able to handle Zoom and email, which most are, even if they can't do much else with a computer.

Thanks (0)
Replying to Tomazaan:
avatar
By TASG
19th Jul 2021 15:50

... and is horribly intrusive from the client's point of view. I don't want to know how much my client pays monthly for their mortgage.

Thanks (0)
Replying to Tomazaan:
avatar
By chancewind
26th Jul 2021 09:42

Get the client to do a paper return all they have to say is that they are digitally challenged "Sorry I do not have internet and cannot work a mobile phone"

Why is it that solicitors do not tell the client they have to report. Currently have clients who have told me they sold last month solicitor said don't worry no cgt to pay but surely they need a report so have got the client to get one underway

Thanks (0)
Replying to Tomazaan:
avatar
By chancewind
26th Jul 2021 09:42

Get the client to do a paper return all they have to say is that they are digitally challenged "Sorry I do not have internet and cannot work a mobile phone"

Why is it that solicitors do not tell the client they have to report. Currently have clients who have told me they sold last month solicitor said don't worry no cgt to pay but surely they need a report so have got the client to get one underway

Thanks (0)
Replying to kevinringer:
Helen Thornley Profile picture
By Helen Thornley
20th Jul 2021 12:41

Hi Kevin
I can see the logic of your approach. I don't see it would work for tax staff in general, but I can see how a partner or sole trader might feel differently about the position. I have to say I am personally uncomfortable with the idea but I'm not sure this is something I should be giving a ruling on. It might be interesting to run past the professional standards team at your prof body to see what they say on that one.

Thanks (1)
Replying to Helen Thornley:
Morph
By kevinringer
20th Jul 2021 16:58

Good idea Helen. I will do.

Thanks (0)