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CGT incorrectly calculated by online service | accountingweb
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CGT incorrectly calculated by online service

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Non-resident taxpayers may be paying incorrect amounts of tax due on UK property sales because the online UK property account service is not calculating the gain based on the figures reported.

8th Nov 2022
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Where a taxable gain arises on a UK residential property disposal the taxpayer must report this gain through the UK property account service and pay the tax due within 60 days of the completion date. It is reasonable to assume that the HMRC online system would correctly calculate the gain based on the figures reported.

For UK residents the UK property account does appear to calculate the gain correctly based on the figures supplied, but where the taxpayer is not a UK resident, HMRC has confirmed on the Agents Forum that the service does not calculate the gain correctly, and the system may even tell the taxpayer there is nothing to pay. 

Rebasing the value

The problem appears to stem from a peculiarity in the capital gains tax (CGT) calculation for non-residents. These taxpayers can use a rebased value of their UK property instead of the actual acquisition value.

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Replies (25)

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By Paul Crowley
08th Nov 2022 17:29

Only in the UK
HMRC know it is wrong but cannot be 4rsed to fix it

Thanks Rebecca, much appreciated

Thanks (10)
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By Hugo Fair
08th Nov 2022 17:50

So are HMRC going to pull their usual weaselly line - and claim that it's the taxpayer's fault if they failed to insert their own calculation of the gain as “initial gain or loss” (despite the lack of any guidance so to do in the Help section)?

And if so ... will:
* any underpayments be excepted from penalties?
* any overpayments be expedited for repayment?

Thanks (6)
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By More unearned luck
08th Nov 2022 20:17

"Where a taxable gain arises on a UK residential property disposal the taxpayer must report this gain through the UK property account service and pay the tax due within 60 days of the completion date."

For resident taxpayers, there is only a need to report if there is tax to pay. A gain, for example, within the AEA doesn't give rise to an obligation to report.
NR taxpayers must report even if there is no gain and gains and losses on non residential properties.

If you report a second disposal for a tax year the system abandons any attempt at computation and simply asks for the gain to be stated. It should do this in all cases. The only system should merely ask for five things:

1. Details of the taxpayer
2 Details of the property disposed of
3 the contract and completion dates
4 The amount of tax due (if any in NR cases)
5 A computation to be uploaded.

Even in simple cases you have to bodge sometimes, for example if a gain has been held-over (eg the property was appointed from a trust), you will only get the machine to give the right answer if you enter the net MV. Or you could simply override the computer's duff answer, if you answer questions literally.

Thanks (1)
By ireallyshouldknowthisbut
09th Nov 2022 08:55

I had this issue with an overseas client as HMRC's "computation" was wrong, and it took a while to work out how to force it to work.

It seems just standard for HMRC software that it is totally rubbish, very user unfriendly and no doubt cost them a ridiculous amount of money to develop through a third party who deny any issue as it meets the incorrectly drawn up spec.................which cant then be changed without a massive bill.

It beggars belief that HMRC don't have a really strong inhouse software team. It would cost a fraction of what they waste on rubbish from outside, and have the huge advantage that their own employees would not be starting from scratch every time, but actually have experience in the systems they are working on, and *shock horror* have worked on the ones that link to it.....helping solve faults and issues. Outsourcing your core competencies never works.

Thanks (12)
Replying to ireallyshouldknowthisbut:
Tornado
By Tornado
09th Nov 2022 09:36

"It seems just standard for HMRC software that it is totally rubbish, very user unfriendly and no doubt cost them a ridiculous amount of money to develop through a third party who deny any issue as it meets the incorrectly drawn up spec.................which cant then be changed without a massive bill."

MTD?

Thanks (11)
Replying to ireallyshouldknowthisbut:
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By flightdeck
09th Nov 2022 15:36

They absolutely do need their own in-house software. It can be argued that 'all' they need to communicate to the developers are the requirements and business rules but HMRC's stuff is HELLISHLY complicated and they would be better served forking out for a UK based software function who can themselves build up knowledge of the rules and the many, many, many ifs and buts. It would still be cheaper than India who may be cheaper by the day but can only be bought in bulk.

Thanks (0)
By ireallyshouldknowthisbut
09th Nov 2022 09:57

Added several other "features" which are not fixed:

1. When you print out the summary, it does NOT detail all the information you have entered. This is just dumb programming.

2. They still have two different payment references for payment. The initial one when you file, and then if you click through to pay...........you get a different one. This is properly stupid.

3. And the big one of course, that this doesn't go to your SA account, but a separate area which is not properly integrated with the tax return. So a massive design fail.

With the ridiculous hoops required to file in the first place, the service does not meet any basic requirements of user friendliness, or any sort of attempt to be efficient in its use.

As such its a botched implementation, adding probably 2 hours of wasted administration of something which was previously very simple and you still of course have to report on your tax return anyway....well done HMRC for making tax harder.

Thanks (19)
Replying to ireallyshouldknowthisbut:
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By justsotax
09th Nov 2022 16:03

I really do believe they excelled on this one.......and you haven't even mentioned the absurd authorisation process for a client that is already a client.....and of course more than a few are of an age.......

Thanks (2)
Replying to justsotax:
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By Hugo Fair
09th Nov 2022 17:52

"and of course more than a few are of an age......."

Careful there, I used that very phrase recently in conversation with an HMRC schoolkid (well, under 30 anyway) and was strongly upbraided with "that's an appallingly judgemental thing to say"!
And with a look suggesting he had an urgent need to write up a recommendation for me to attend the nearest re-education gulag, he was gone.
So looking forward to making all those claims for digital filing exemptions.

Thanks (2)
Replying to Hugo Fair:
Tornado
By Tornado
09th Nov 2022 18:30

A clear demonstration of the toxic arrogance that MTD is based on.

"If I can do it then so can everyone else, regardless of their age or ability"

Thanks (2)
Replying to Hugo Fair:
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By Paul Crowley
10th Nov 2022 14:10

HMRC now have it
No real comment to make so go woke will do
Hope he went off to his safe space

Thanks (0)
Replying to ireallyshouldknowthisbut:
Morph
By kevinringer
09th Nov 2022 16:25

Item 2 reminds me of PAYE where the submission reference is different to the payment reference. We don't need different references for SA, CT or VAT, so why PAYE/CIS and now CGT? Where were the OTS when all this happened? What about Liz Truss' "simplification is at the heart of Government". I know she can't be blamed for this fiasco, but it proves that simplification is certainly not on HMRC's radar.

Thanks (2)
Caroline
By accountantccole
09th Nov 2022 11:05

Good to know - thank you

Thanks (0)
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By tedbuck
09th Nov 2022 14:06

Thanks Rebecca.

Another botch by HMRC - I think we ought to be able to fine them for getting it wrong (and not bothering to reply to letters etc.) Give them a bit of their own medicine. Perhaps we should save everyone a lot of time and just make up figures to submit to HMRC? Do you think they would notice? After all MTD doesn't really work any better than its predecessor but it's 'digital' so must be right. So enter your fairy tale onto a spreadsheet and file promptly and you'll be OK. HMRC won't look at it because it's digital and because they don't have trained staff any longer and because as long as the figures are small it's not worth the trouble of chasing.
Oh for the days of the Inland Revenue when they trained tax officers to whom you could speak. Our old CIR office here is now a car park. Says it all doesn't it?

Thanks (2)
Replying to tedbuck:
Morph
By kevinringer
09th Nov 2022 16:33

If a taxpayer makes a mistake, HMRC can fine them. If the taxpayer's generated returns that were wrong, and the taxpayer knew they were wrong but didn't fix the system, HMRC will consider the taxpayer to have made a deliberate mistake and fine them up to 70%. So if the taxpayer can be fined 70% for not fixing their system, surely HMRC should be fined 70% for not fixing their system. I reckon HMRC should be compelled to automatically repay 70% of the tax as compensation, and this is deducted from the bonuses of those in HMRC responsible for implementation and running of these systems.

Thanks (3)
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By raycad
09th Nov 2022 15:16

I've done four NRCGT returns so far, three for residential properties and one for a commercial property. In each instance I have had to play the "digitally excluded" card with HMRC because, as has been alluded to in other threads, it is well nigh impossible to perform the so mis-named "digital handshake" for a non-resident, especially when they have a foreign-issue mobile phone.

The paper form, evidently like the digital version, does not have anywhere to report the 5/4/15 or 5/4/19 valuations. I have had to resort to entering these in the box for the cost of the property and put an asterisk note stating that this relates to the figure at the relevant valuation date. (Can't easily put an asterisk note in a digital version, though, can you?)

I have what has now become a stock covering letter, pointing out to HMRC that the form is fundamentally flawed for Non-resident use. But it is like casting pearl before swine! The irony is that, before 5/4/20, the NRCGT form had a space for these valuations but HMRC then merged it with the one for UK residents, presumably on the grounds that "one form fits all". Except of course that it doesn't!! What's more HMRC must surely have known all along - or should have done - that it doesn't.

Tax agents will be aware of the workaround but, as Rebecca's article makes clear, the lay person will almost certainly have fallen into a perfectly predictable bear-trap. Will HMRC do anything about it? What do you think?

Thanks (0)
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By D V Fields
09th Nov 2022 16:04

Oh dear. Another perceived benefit of online cloud systems over Excel gone. Are there any left?

Thanks (0)
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By Hometing
09th Nov 2022 16:12

If they've managed to successfully access the online service as non-residents, they are doing better than many.

Thanks (1)
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By raycad
09th Nov 2022 16:45

MY APOLOGIES IF THIS POST APPEARS TWICE BUT MY FIRST POSTING DISAPPEARED AFTER I TRIED TO EDIT IT!

I've done four NRCGT returns so far, three for residential properties and one for a commercial property. In each instance I have had to play the "digitally excluded" card with HMRC because, as has been alluded to in other threads, it is well nigh impossible to perform the so mis-named "digital handshake" for a non-resident, especially when they have a foreign-issue mobile phone.
The paper form, evidently like the digital version, does not have anywhere to report the 5/4/15 or 5/4/19 valuations. I have had to resort to entering these in the box for the cost of the property and put an asterisk note stating that this relates to the figure at the relevant valuation date. (Can't easily put an asterisk note in a digital version, though, can you?)
I have what has now become a stock covering letter, pointing out to HMRC that the form is fundamentally flawed for Non-resident use. But it is like casting pearl before swine! The irony is that, before 5/4/20, the NRCGT form had a space for these valuations but HMRC then merged it with the one for UK residents, presumably on the grounds that "one form fits all". Except of course that it doesn't!! What's more HMRC must surely have known all along - or should have done - that it doesn't.
Tax agents will be aware of the workaround but, as Rebecca's article makes clear, the lay person will almost certainly have fallen into a perfectly predictable bear-trap. Will HMRC do anything about it? What do you think?

Thanks (0)
Replying to raycad:
Morph
By kevinringer
09th Nov 2022 18:39

I've only had to do one NRCGT so far. The client is an ex-pat for whom IT is a big part of his job, but he couldn't figure out how to create a GOV.UK account, so we had to resort to the paper form. I crossed out sections of the paper form and sent it to HMRC with my computations and a covering letter. I subsequently spoke to HMRC who told me they ignored the form and just used my letter and computations. In which case, why do we need to bother with a paper form at all? The delays posting it abroad and back could then be avoided.

Thanks (1)
Replying to kevinringer:
By SteveHa
10th Nov 2022 10:33

It's not just the needing of an irrelevant paper form, but the fact that we are supposed to call HMRC on a case by case basis to get one.

Suffice to say that I don't do what we are supposed to do, but I have one saved that I re-use as required.

Thanks (0)
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By twohaporth
10th Nov 2022 11:26

I like the idea of fining HMRC but it will never happen - but...................................

HMRC are bound to recompense the taxpayer where they are responsible for costing the taxpayer money in terms of additional costs.

I have done this occasionally where HMRC have been particularly at fault but usually don't bother. But................ What if we all did it at every opportunity - every delay in a liquidation where the cost of an extra set of accounts has to be met because HMRC hasn't responded to communications, (my latest example) Where HMRC amend a return incorrectly and we have to go through a performance to get them to see sense (two of those at the moment) Where HMRC won't repay sec 455 tax (only one of those at present) and so on.

Now if all of us good and straightforward chaps and ladies who just suffer this rubbish quietly sent HMRC a bill each time don't you think that HMRC might, just might, think Sh*t, we better do something or we'll have no money left for wasting on MTDfITSA or the Christmas Party or whatever else our resources are wasted on. They might even get off their wfh butts and stagger into the office and do a bit of work. (Might be a problem there as, from what I have heard, there is little or no training available which is why the phones aren't answered - it takes so long to find a person who can answer a question!)

Could even be encouraged by CIOT, ACCA and ICAEW as they seem to achieve very little at present so perhaps a revolt from the taxpayers through us is the answer.

Oh Dear what have I started?

Thanks (0)
Replying to twohaporth:
Morph
By kevinringer
10th Nov 2022 12:02

I seldom reclaim costs because HMRC won't accept a bill from me. Instead, HMRC require that we bill our client, the client pays us, then the client reclaims from HMRC who pay the client direct. Typical HMRC convoluted process. In recent times HMRC have refused to pay if the case is not subject to a complaint.

We could of course send bills that we know will fail HMRC's reimbursement process, but if we all did it as you suggest, HMRC will then at least be aware how this impacts us.

Regarding the PBs, it is important that we supply evidence of actual problems. All the PBs have IOG representatives (they're listed in the back of every Agent Update). Send your IOG rep evidence. HMRC should then investigate and explain why the problem happened and what they're going to do to resolve it at a systemic level.

Thanks (1)
Morph
By kevinringer
10th Nov 2022 11:28

I know from discussions with HMRC CGT technicians that when I send in computations and a covering letter, HMRC ignore the paper PPDCGT form and instead issue a paper bill for the amount stated in my computations. That means it was a waste of my time (and HMRC's time) ordering the paper form, and a waste of my time filling it in. That being the case, why do we need to bother with the paper form at all? It would save a lot of all our time, and speed up the declaration process, if HMRC would accept computations from agents without a paper form.

Is this something the PBs could propose to HMRC?

Thanks (0)
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By Pat Nown
10th Nov 2022 14:11

very interesting I will pass it on to our clients where I can Thanks Rebecca

Thanks (0)