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