Former Tax & IT Partner
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CGT 30-day reporting: Easing pains from gains

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Paul Aplin investigated the problems emerging from the residential property CGT return and discovered two points of concern: the 30-day reporting limit and the level of awareness. Surely there is a way to simplify and improve compliance?

21st May 2021
Former Tax & IT Partner
Columnist
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In some cases, the information will be readily to hand; in others, some or all of it will have to be searched for.

Both of these points were made during the Tax Talk session and several ideas were floated. The most radical was to require the solicitor dealing with the transaction to withhold funds from the sale proceeds and pay this across to HMRC.

A less controversial suggestion – which was also flagged in John’s piece - was that it should be incumbent on the conveyancing solicitor or the selling agent to alert the taxpayer to the need to make a return and to point them to the appropriate guidance. 

Simplification

These two issues were considered by the Office of Tax Simplification (OTS) in its latest report on capital gains tax. The report notes that between 6 April 2020 (when the reporting requirement commenced) and 6 January 2021, more than 50,000 UK property tax returns were filed, one third of them outside the 30-day time limit.

It is too early to know whether there were taxpayers who should have completed a return but who did not do so. A one-third compliance failure rate must be a concern.

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Replies (15)

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By Hugo Fair
21st May 2021 14:23

Whilst I wholly agree with the desirability of your 5 questions for inclusion in "all new digital design proposals", they also contain the kernel of the core problem ... that those then evaluating any such proposals need to have a truly holistic understanding of all the possibly impacted systems.

Right now I know of only a handful of HMRC staff who come close to having that skill/experience set (and even then invariably with more specialism in some areas than others) - but they are all on the verge of retirement! It is not a prerequisite to have gained the knowledge through the scars of time (although it helps), but the current culture of quick-win/agile development goes hand in hand with the antithesis of what's truly necessary (as it's based on short-term 'ticks' before moving on).

FWIW the other brake on effective future development is the old (but still true) chestnut ... that the foundations need to be re-designed (and largely re-built) before new gewgaws are merrily added with the aid of sticky-tape and a dollop of hope. If you use a building for the metaphor, the foundations weren't designed either to take the weight now imposed nor the environment in which it resides.

Of course the two issues are almost conjoined ... in that if anyone was serious about tackling the aged systems that lie at the heart (or should that be pit) of our HMRC/DWP architecture, then we'd first have to capture the knowledge about them before it disappears and then design a replacement foundation that is not just fit for purpose but has a strong rule set to support future adaptability.
And the least favourite concept in govt circles (though common place in private sector) a serious investment in people & money to maintain/upgrade these systems until they next need replacing.

Thanks (6)
By ireallyshouldknowthisbut
21st May 2021 15:31

This is a classic case of "political will" being met by "computer says no", leading to the development of a unique standalone work around - which is not properly integrated into anything else - generating a huge admin headache.

All for what amount to a mild acceleration of receipts.

The extra work involved now to report gains is phenomenal. My client would be happy to pay a £200 -300 "fine" just to put it on their SA rather than pay me to deal with it in year.

Its all very disjointed thinking and I suspect will be quietly ditched at some point as an 'efficiency drive' to cut red tape.

The only SENSIBLE way to do this, if have the solicitor nab the cash upfront on a simplified bought/sold/flat rate of tax as a withholding tax, and then leave it up to to the tax payer to claw it back with a more complex return following the sale, or wait until SA time. This would at least generate some cash up front, and target some of the avoidance that must be the intended target here, and avoid the current farcical situation of loads of paperwork for no real reason.

Non-compliant tax payers are not going to pay it in 30 days any more than they will on their SA so the second its voluntary all it does it add vast swathes of admin to paying your taxes. No extra tax is being generated, and I imagine probably less as once you have missed the deadline some tax payers will tend to say nothing and keep their head down.

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By carnmores
21st May 2021 18:15

I hope Paul is up to speed on the current thread

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By SteveHa
22nd May 2021 08:29

Whilst I think the system for reporting gains is unnecessarily complicated, and appears to be designed to minimise the risk of compliance, you are being disingenuous regarding the time taken to comply.

This week, starting on Tuesday, I learned of two clients (married couple) who had made a reportable property disposal, with a deadline for submitting the Return of yesterday. Elderly couple, with no GG login.

Nevertheless, with the help of their grandson, we managed to get them each set up with GG logins, registered for CGT online, and our authorisation to act, together with actually filing the Returns by the end of the day on Thursday.

It could have probably all be done in the one day if, well, neither I nor the client's grandson had nothing better to be doing.

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Replying to SteveHa:
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By Hugo Fair
22nd May 2021 15:19

Of course you're right conceptually ... a bit like the lead software developer who eventually got me to stop asking whether something was possible by pointing to the printed card above his desk that said "Yes ... but it may take an infinite amount of time & resources"!

Congratulations (truly without sarcasm) on what you achieved last week - but:
a) Why did clients and you only happen to "learn" about the property disposal and the resultant CGT deadline?
b) What would have happened if their tech-savvy grandson had not been available and prepared to help?
c) Who's paying for all this extra and urgent work (both your and logically the grandson's time)?

In other words, it's not a matter of whether or not it could all be done in the one day ... it's the randomness in taxpayers even being aware of the issue, which leads to the urgency and in turn requires them to be more technophile than many - whilst assuming, in your own words, that you had nothing better to be doing!

Thanks (8)
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By johnjenkins
24th May 2021 10:13

Great article. This brings to the fore the necessity of people in business to find out what their obligations are. Too many rely on their Accountant to sort stuff out after the event. The days of that are long gone and with the advent of more digitalisation, there will be more problems. The gap between high techies and low techies are ever widening. Great ain't it when you can't just send them some money without having to go through hoops of opening this, getting a code for that, activating the other etc. The problem you also have is that a lot of HMRC staff aren't that tech savvy. One thing that bugs me is that residential rental properties are not considered a trade, yet holiday accommodation is (roll over relief).

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By bosclibby
24th May 2021 10:57

I really don't get why it's not incumbent on Solicitors/Conveyancers to tell their clients that they may need to complete this Return (either themselves or via their Accountant). I dread to think how many unreported disposals there already are even from represented taxpayers and at least this approach would help.

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By hiu612
24th May 2021 11:19

The system has also been released half baked. I've had non resident clients who had to use a paper return as they didn't have any of the requisites to set up online (e.g. UK mobile phone, UK bank account, UK address, UK passport etc). I've had UK clients have to do paper returns, including one of a husband and wife where the same taxpayer successfully registered for one of the couple but spent hours trying the other one, including on the phone to HMRC, in vain, and was eventually told to do it on paper. I've had a person dealt with by Cardiff (non online filer) who i called and who had never heard of it, then called me back and told me to write them a letter and they'd manually assess the tax. And of course, it is not possible for executors to appoint agents to file online, so whenever we do one for an estate that also needs to be sent on paper. And now there are reports of calculation errors if taxpayers file returns in successive years and of overpayments not being able to be offset against income tax payable for the same year. Perhaps most frustrating, though, is why the filing can't be done via API rather than a web service. I'm sure that a few years ago HMRC adopted a policy of API services. We'd then have the gains pre-populated in our tax software instead of making an online real time report then transcribing it into tax software for year end returns. All rather frustrating.

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By Ajtms
24th May 2021 11:49

Thanks for raising this Paul, but I fear that you have only scratched the surface and perhaps have not seen the practical problems stemming from the legislation.

Yes, despite the legislation referring to a CGT payment on account, it is not, and as you say HMRC have made this into a stand alone return that has no interaction with the rest of CGT. You are correct that a separate 64-8 or digital equivalent is needed as apparently HMRC have removed the existing 64-8 from the computer screens of HMRC staff dealing with this new 30 day CGT reporting requirement. Surely it is a criminal offence to take away a statutory right to representation? HMRC have already refused to communicate with me over a paper equivalent PPDCGT which is only available to executors and digitally excluded taxpayers.

I also question why the legislation says that we cannot amend the property CGT return after the date when the SA100 is lodged and why we cannot amend the CGT property return to reflect post sale share losses or a reduced basic rate band becoming available.

If there are post property sale share losses or a reduced basic rate band becoming available, they cannot be offset against the property gain on the SA100 and cannot be used to amend the CGT property return and you cannot therefore obtain a CGT property return refund.

It seems that the only way to obtain a property return CGT refund is to create a fictitious second property sale to over-ride the original so as to bring in the post property sale CGT share losses or the availability of more of the basic rate band than originally thought.

Even then, HMRC cannot tell us how to claim a refund of the 30 day tax. The return does not ask for bank account details to make the refund to, nor is there any interaction with the SA100 so no CGT refund will be given via the the SA100 and no offset against an income tax liability is possible.

Since the property gain must also be reported on the SA100, a post sale share loss is naturally married up with the property gain leaving zero losses to carry forward, but there remains no HMRC guidance on how we then claim the CGT refund for the 30 day return. You will note that the tax has to be paid on a separate account so it is not mixed in with the UTR account, thus preventing an offset.

If somebody has managed to obtain a refund of the 30 day property tax, please would you let us all know how to obtain it as HMRC won't tell us.

In my 40+ years as a tax advisor, I have never before seen such terrible draconian legislation as Schedule 2 FA2019. This is a real wake up call to what is coming next with the even more diabolical MTD.

Thanks (7)
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By North East Accountant
24th May 2021 12:38

NEA Simplification proposal - abolish this crazy waste of time return.

The filing setup is something my 13 year old could have designed better.

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By rogertax
24th May 2021 13:20

I submitted a paper return (long story) by the deadline of 15 January 2021. In early March 2021, I rang the CGT helpline in the absence of a demand. Acquainted the helpline with the PPDCGT form and the legislation. Earlier this month, client received notice to pay!

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By KABcraigmore
24th May 2021 18:06

Just for my further enlightenment in the arcane workings of HMRC, can anyone tell me why they homed in on just residential properties to qualify for this ridiculous scheme. If its supposed to be improving HMRC cash flow I don't believe it. From the attitudes taken by HMRC staff on calls about administration of PAYE code numbers, they're just not interested in improving cash flow from this easy source. Its taken me since December, (written submission + 3 long-wait telephone calls) to persuade HMCR to include taxable bank interest in a coding. "your client's going to pay more tax-is that what you want?" And why just residential property? Don't business and other properties sell at prices which make gains? Why not a requirement affecting all sales of capital assets over say £100,000. I just don't get this concern with property that has a resident as opposed to those that haven't

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Replying to KABcraigmore:
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By Ajtms
24th May 2021 18:33

I wish I could understand it. The cost of the crazy scheme has to be many times greater than the lost interest on the exchequer waiting until the normal CGT payment date. The government borrows from the B of E at 0.25%. I like you have tried to get HMRC to assess monies where we have given them written Notice of Chargeability and have sent these by "signed for" post. It is obviously too much trouble for them.

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By Mister O
24th May 2021 20:44

Is everyone aware that you can only report one gain per tax-year on-line? I sold two properties (separately) in 2020/21 and it wasn't even possible to obtain the paper return required for the second one within 30 days, especially since HMRC can currently add the blanket excuse of 'Covid' to their already extreme inefficiency.
How could anything be less integrated and more disjointed in the current era than a compulsory paper return? It's hopeless.
So why can only one disposal be reported on-line and is this going to be 'improved' any time soon?

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Morph
By kevinringer
24th May 2021 21:32

This is yet another inadequately piloted system. The problem is HMRC asks for volunteers. Only a tiny number will come forward and they'll all be model taxpayers and IT whizzes. A true pilot would involve HMRC getting a range of taxpayers to use the system including the digitally challenged and those who leave everything to 31 January. If HMRC had done that for this new regime HMRC would have seen the problems. It's the same with MTD. Remember back in 2016 when HMRC expected 400,000 to sign up for the MTD ITSA pilot that started in 2017 with the incentive that anyone who participated would not have to fill in a 2018 Tax Return? Well what a roaring success that was. How many signed up? I've heard on the grapevine that it was less than 50 and most have since dropped out. If HMRC wants these new systems to work HMRC needs to pilot with typical taxpayers not saints.

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