CGT: Pay on account within 30 days

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Jacquelyn Kimber reviews the consultation document which sets out proposals for accelerating the payment of capital gains tax (CGT) due on disposals of residential property from 6 April 2020.                     

This CGT consultation (Payment window for residential property gains) follows an announcement made at the 2015 Autumn Statement that HMRC wanted to make paying CGT “simpler and quicker” for taxpayers, and address the fact that payment of CGT is “out of step” with the position of taxpayers within PAYE.

That statement is disingenuous (to put it mildly) and appears another attempt to portray individuals holding residential property as being “on the take” when they are doing no more than paying taxes in the manner set down in law.

The CGT payment on account rules were originally intended to apply from April 2019, but have been delayed until 6 April 2020, with draft legislation expected in summer 2018 and final provisions enacted in the 2018-2019 Finance Bill.

Summary of proposals

The consultation extends the non-resident capital gains tax (NRCGT) regime to UK resident individuals and trustees with a few modifications.

UK residents who dispose of residential property on or after 6 April 2020 will be required to deliver a return to HMRC and pay any CGT due within 30 days of completion. Where no tax is due (eg, where private residence relief applies, or for overseas property, any UK tax is fully offset by foreign tax paid) or there is a loss, no CGT return is required, although reporting may still need to be made on the individual’s self assessment return.

Non-UK domiciled individuals disposing of overseas residential property will also not be required to submit a return or pay tax provided they are taxable on the remittance basis for the tax year of the disposal.

In an effort for consistency across the CGT regimes, the existing definition of ‘residential property’ found in TCGA 1992 Sch B1 will apply, so all the current complications of what is “suitable for use as a dwelling” are similarly imported into the new regime and actual use of the property will be ignored.

The NRCGT rules themselves will be modified, so that the current payment deferral which applies where the non-resident is subject to an ATED charge or is otherwise within self assessment (eg, as a non-resident landlord) will disappear from 6 April 2020.

Unlike “resident CGT” returns, however, an NRCGT return will still be due even if no CGT is actually payable. Quite why HMRC choose to complicate compliance obligations in this way is baffling, especially when as it states the rationale for change as making CGT “simpler”.

Surely this would have been a good opportunity to backtrack one of the more ludicrous aspects of the NRCGT regime (which I explored in my previous article) and remove the requirement to deliver a return even when no tax is due?

Is it simplification?

Perhaps we should take HMRC’s efforts at simplification a little more seriously, given the proposed treatment of capital losses.

Unused capital losses brought forward (from any source, excepting the special rules for connected party losses) and the annual exemption can be deducted in calculating the CGT payment on account due on a disposal of residential property.

If the taxpayer makes a subsequent disposal of another residential property in the same tax year and realises a loss, he can make a claim for repayment on the grounds that the later loss will be offset against the earlier gain. But losses arising on other assets in the tax year after the residential property disposal cannot be offset, other than in the self assessment tax return.

So it is possible for a large payment on account on a residential property gain to be retained by HMRC until the self assessment return has been filed, even if the taxpayer makes an even larger loss on a sale of shares the next day. This (and I’m not making this up!) is to “avoid undue complexities”.

More nonsense

Another blatant nonsense is the proposed rule on disposals which straddle the tax year, ie where contracts are exchanged pre 5 April (say 31 March) but completion is some time after.

Whilst the taxpayer’s self assessment return for the earlier tax year will need to include details of the disposal, as the CGT is reported based on the date of the exchange of contracts. The tax due on that SA return will be payable by the following 31 January, subject to offsetting amounts paid on account, but the payment on account itself will be due within 30 days of the completion date.

This on-account payment date could fall after the 31 January ‘normal’ payment deadline, in extreme cases, but there is no mention of any sensible rule preventing this in the consultation.

Penalties

FA 2009 Sch 55 will apply, but hopefully the worst of the disproportionate penalties being levied under NRCGT will be avoided here, given that there will generally be no requirement to file a return when no CGT is actually due. Common sense at last? What do you think?

About Jacquelyn Kimber

Jacqui Kimber

Jacquelyn Kimber is a tax partner at Newby Castleman LLP in Leicester, where she advises on a range of tax issues affecting individuals and businesses, including offshore matters and trusts. She can be contacted on 0116 254 9262 or by [email protected]  
 

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29th Apr 2018 07:08

It strikes me that many of the changes like this (CGT within 30 days, APNs etc.) exist purely to boost HMRC statistics.

When HMRC report on the "success" of such schemes, they only report the take, and never what they have had to give back later. This makes it look like they are doing a better job than they actually are.

It's basically a statistical con at the expense of honest taxpayers.

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29th Apr 2018 10:27

well HMRC could always charge both buyer and seller SDLT like auctioneers. They could do this and allow the sellers SDLT as a deduction from any CGT payable later.

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By gordo
30th Apr 2018 10:12

Hmrc’s new primary objective is “maximise revenues”. It’s on their website. What became clear very recently was that all civil service departments have targets.

When a business is in trouble it will often try to accelerate income

The previous heads of HMRC have received Honours and a large pension top up

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30th Apr 2018 10:29

How about they are getting ready for a future change in the law to tax to CGT all property sales and do away with the exemption for primary residence?

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By Ajtms
30th Apr 2018 11:16

In all the property sales I have to calculate the CGT on they have land well in excess of 1/2 Hectare and it takes months for surveyors to produce a detailed report and valuations. It would be physically impossible to even have a vague idea of the figures in this case within 30 days.
This is another clear example of HMRC not having a clue about what happens in the real world.

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By tedbuck
30th Apr 2018 11:41

Richards 1 is about right. I have heard this mooted several times.

It joins CGT, SDLT and IHT - basically the taxes on inflation caused by the government's mismanagement of the economy. Gordon Brown being the main culprit because he could see lots of money coming in that he could then dole out to the indigent to gain their votes.

May seems to be on the same ploy but it won't work for her because she is hitting her own power base.

Still a dose of Corbyn would see us like Russia with the Rich getting richer and the poor getting poorer and living in Soviet style apartment blocks that are very evident as you travel from the airport to Moscow. In Moscow, inside the garden ring, all is different. The Range Rovers, Porsches, Bentleys and Mercedes all have their bodyguards, many armed and the owners even have armed guards outside their hotel rooms sometimes.

Sounds to me like the devil and the deep blue

O Brave New World....

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to tedbuck
30th Apr 2018 13:36

tedbuck wrote:

Richards 1 is about right. I have heard this mooted several times.

It joins CGT, SDLT and IHT - basically the taxes on inflation caused by the government's mismanagement of the economy. Gordon Brown being the main culprit because he could see lots of money coming in that he could then dole out to the indigent to gain their votes.

May seems to be on the same ploy but it won't work for her because she is hitting her own power base.

Still a dose of Corbyn would see us like Russia with the Rich getting richer and the poor getting poorer and living in Soviet style apartment blocks that are very evident as you travel from the airport to Moscow. In Moscow, inside the garden ring, all is different. The Range Rovers, Porsches, Bentleys and Mercedes all have their bodyguards, many armed and the owners even have armed guards outside their hotel rooms sometimes.

Sounds to me like the devil and the deep blue

O Brave New World....

'All that was a party political broadcast by the Conservative Party........'

All within the same week as the local elections.

cynicism?

Anyhow, back to the OP, this all stinks of stats and nothing to do with simplification.

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01st May 2018 08:25

Just by saying it's simpler doesn't make it so.

Never mind more nonsense the whole things nonsense dreamt up by people who have no clue.

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02nd May 2018 09:58

They really need to get out in the real world. Ivory tower people with no clue how things are out here, continually making up new rules without any thought on how they work in practice.

The last thing a client selling one of his property portfolio properties will be thinking about is making sure all the details are ready within 30 days to make a return!

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