Editor in Chief AccountingWEB
Columnist
Share this content
Access restricted to CGT reporting by cumbersome digital handshake
iStock_No entry_fatido

Digital handshake issues hamper CGT reporting

by

Clients and accountants are having trouble getting authorisations in place to submit online property sale CGT reports – often falling at the first hurdle.

15th Sep 2021
Editor in Chief AccountingWEB
Columnist
Share this content

Frustrations with agent authorisations have been a constant source of complaints on Any Answers the past couple of years, but are reaching a new level of anguish with the expedited 30-day capital gains tax (CGT) reporting process introduced in April 2020.

The problems caused by the CGT portal came under the spotlight during a recent Any Answers Live webinar with ATT technical officer Helen Thornley and Natasha Herron, tax manager at Hillier Hopkins.

The webinar tackled all sorts of property tax conundrums, but the impracticalities of the digital handshake process to create a CGT property account and authorise agents was a persistent theme.

Digital handshake strategy

Thornley is an acknowledged expert on the digital handshake process and explained that HMRC has a strategy to move away from paper-based 64-8 agent authorisation forms to an online approach based on similar principles to client authorisation for Making Tax Digital for VAT. 

New agent services created outside the MTD Agent Services Account (ASA) such as the Trust Reporting Service and CGT Property Reporting Service have to go through a similar digital handshake process. So anyone wanting to set up a Capital Gains Tax on UK Property account to report a sale has set up a separate property account using their Government Gateway credentials.

In her step-by-step guide on the ATT website, Thornley mapped out the sequence:

  • Step 1: Create a property account: If they already have a Personal Tax Account, the same Government Gateway ID and password works – but taxpayers can create a new gateway ID if they really want.
  • Step 2: Alert the agent: Send the 15-digit property account reference number and their postcode (or country of residence if non-resident) to the agent.
  • Step 3: Agent requests access: Agent logs into their ASA and asks client to authorise them to manage their property account by using the 15-digit reference number and client’s postcode to generate a time-limited link they can send to the client by email.
  • Step 4: Taxpayer authorises agent: When they get the link, the client has to approve the agent before it expires (usually 7 or 14 days), using their Government Gateway ID. Tthe agent should then get an email confirming whether their appointment has been accepted or rejected.
  • Step 5: File the return

“In theory it’s easy, but in practice it’s a big pain,” Heron told the webinar audience. In some instances, clients living in Northern Ireland were asked in the ID verification sequence for specific Northern Ireland driver’s licence references, when they only had UK licences. With so many clients getting stuck at the first digital handshake hurdle, Hillier Hopkins had to revert to paper forms that can take months to receive from HMRC and complete. 

“By that point, clients have forgotten they needed to pay the tax. It all seems like a long-winded process when they could just have done with their tax return,” Herron said.

Losing patience

Back in May, AccountingWEB member kevinringer lost his patience with the new process. “The whole 30-day regime is a disaster,” he commented.

At that point, none of his clients had successfully authorised him as an agent, forcing him to phone HMRC (“45+ minutes in the queue”) to obtain a paper PPDCGT. “This is crazy because, like most agents, I’ve been 100% digital for decades and I can submit a digital SA Tax Return without having a 64-8 in place. And a 64-8 covers SA, which includes CGT. So why did HMRC make this tiny part of CGT subject to a different authorisation?” he wailed.

“In normal times we could ask clients into the office and go through the authorisation process with them. But we were in lockdown when 30-day CGT started. Why start a major reporting regime change just days into the UK’s first national lockdown?”

Finally, when reporting property disposals, the CGT has to be estimated because the income has to be estimated. “Most of my clients are self-employed and can't predict their income at the best of times, and certainly not during Covid,” kevinringer said.

“HMRC have told me they are currently about 130 days behind processing the PPDCGT. I’ve got clients I’m ready to submit their 2021 tax return but can’t, because I’m waiting for HMRC to process the PPDCGT.”

Going to be around for a while

During the webinar, Thornley explained that the digital handshake was part of a bigger project that reaches beyond HMRC within the government and making it more user-friendly was going to be a longer-term project.

“That initial hurdle is going to be with us for at least another 12-18 months, if not longer,” she said. The lack of an alternative mechanism was a deliberate move to encourage use of the digital handshake, she continued: “The belief is that if paper is available, everyone would just do that and no one would do the digital handshake… It has been something we asked for, but is not something we’re going to get.”

To see the full Any Answers Live webinar on-demand, visit the AccountingWEB Live Digital show page and watch it there.

Replies (13)

Please login or register to join the discussion.

rebecca cave
By Rebecca Cave
16th Sep 2021 09:17

Another example of a new online process not being properly tested before it is rolled out.

Thanks (8)
Replying to Rebecca Cave:
avatar
By Paul Crowley
16th Sep 2021 20:37

For HMRC the new normal

Thanks (1)
avatar
By Catherine Newman
16th Sep 2021 09:40

I will be holding a meeting with a client where we will do it together in the next week or so unless there is another lockdown. I managed to talk a client through doing it herself but have yet to see what the questions are. Luckily in my area the broadband is OK.

Thanks (2)
avatar
By North East Accountant
16th Sep 2021 09:54

Do a paper return... once you've done the CGT Comp it takes less than 5 mins to fill in.

Thanks (4)
Replying to North East Accountant:
avatar
By Paul Crowley
16th Sep 2021 20:42

My firm wasted 2 people 7 hours on one poxy go at the electronic version
Standard operating procedures are now:
Do it in paper (after putting it on the software for the proper tax return)
Send in the spreadsheet that the calculation was first done on
Assume no other income in the year
Add to the package a cheque for tax

Thanks (1)
avatar
By Marlinman
16th Sep 2021 10:16

Probably a lot less hassle to just do it on the year end SA return and take the penalty and small amount of interest on the chin.

Thanks (3)
avatar
By dross5
16th Sep 2021 10:19

Yes, I keep getting the issue about the Northern Ireland driving licence with clients, and I am in Scotland. They have a UK licence and it won't accept the UK licence number - as it is expecting a Northern Ireland number. Several clients have then gone through the credit check questions (as the only option left) and failed - because they can't remember when things happened. I just wonder if this will ever get sorted and how do you feed back to HMRC to get it changed?

Thanks (1)
avatar
By Ben Alligin
16th Sep 2021 10:39

You can't even do it for the taxpayer . I hold a LPA financial for my father who is 90 and in a care home. I need to file a 2020/21 tax return on his behalf. I have set up an online account for him, selected the Income Tax option to register for, entered his UTR, his date of birth and his NINO which matches all data held by HMRC.
However we now need to prove who he is with a digital signature. You can guess the rest, he doesn't hold a passport, nor a UK driving licence.
Well done HMRC yet again.

Thanks (6)
By SteveHa
16th Sep 2021 10:56

The whole process is a mess. As Kevin highlighted, if we are already authorised with a 64-8, CGT is included in that authorisation, so why do we need another.

And the inability of the authorised agent as above to manage the process from start to finish without the client having to jump through their own hoops is equally baffling. Bureaucracy for bureaucracy's sake.

If HMRC want people to comply, they should design their systems in such as a way as to facilitate compliance with the minimum of fuss.

But, as I've said frequently, HMRC IT systems are a holy mess, with no joined up systems.

For example, why does it take up to 72 hours for an address change to show? Most computers in the world (including Casio calculators) can work at near real time speed. Do HMRC only have a front end, with a little man in the background printing off and running around to update things?

Thanks (5)
By ireallyshouldknowthisbut
16th Sep 2021 11:19

This is more about the failure of HMRC to realise that most tax payers want nothing to do with them.

Most do not want a digital account. They most certainly do not want to waste an hour or more of their time setting one up to deal with a single transaction.

Ongoing they do not want to receive texts or emails to tell them to log onto it to read a notice which might or might not be relevant. Given all the scams about then unless its on paper many clients will ignore.

Clients just want to pay someone to make it all go away.

Trying at every turn to get clients to set one up has not worked so far, and is unlikely to work in the future. All I see with my clients is they end up with lots of the things set up at different times which then makes the whole thing fall over when the account they set up 4 or 5 years ago is now obsolete interferes with a new attempt to set one up.

No doubt HMRC approach will be - stop processing the paper forms.

We know they are doubling down on this by insisting on this for starting to file for MTD rather than just blanket authorising existing clients to agents or simply setting them up for us.

Thanks (7)
avatar
By alialdabawi
16th Sep 2021 17:26

Where is/have been the OTS?

Simplification of taxes is as much about the administration of taxes as it is about tax law.

Indeed, simplifying the administration of taxes is far easier and more easily achievable, with a minimum level of input.

If the OTS - or government as a whole - cannot even simplify such things, there is no chance that Making Tax Diabolical will go as evisaged by the tunnel-visioned numpties pushing it.

Quick and easy wins first, please.

Thanks (7)
avatar
By djtax
20th Sep 2021 12:31

This just shows what a shambles HMRC are at implementing new online systems - poor communication with the general public and abysmal attempts at running any meaningful, comprehensive trial/pilot sufficiently in advance of going live. Not all estate agents and solicitors were even aware of the new 30 day CGT requirements yet they are at the front line of property sales - and without them warning clients how many taxpayers contacted their accountants within the 30 day period, let alone unrepresented taxpayers managing to get it all sorted in time?

It doesn't exactly bode well for MTD for Income tax - a project affecting a far greater number - where is the HMRC advertising campaign (now) on that or are taxpayers supposed to be psychic?

It is high time those at the top of HMRC are told what really goes on down here at grass roots level - but who is going to get the message across when the likes of Jim Harra so arrogantly ignore our input and assume they know best?

Thanks (2)
avatar
By littlerich
11th Oct 2021 15:21

Even agents are falling foul of the digital handshake. I now have to go through full authorisation every 12 months just to refresh my tax software connection to HMRC. All I need is a Northern Ireland driving licence (I live in the west country and always have), credit checks (OK I can guess my way through that maybe), and/or a passport (I am one of these odd people who do not travel overseas so do not possess one). I guess I will have to obtain a passport (or move to NI) just to service my clients. So is a passport now a business expense?

Thanks (0)