HMRC statements mislead taxpayers
Taxpayers rely on HMRC to explain what costs they can claim for, and what taxes should be paid by which dates. Rebecca Cave looks more closely at two recent HMRC statements that instilled confusion rather than clarity.
The latest misleading statement from HMRC came in an FT.com com article on 27 November in which HMRC’s interim director general for customer services Karl Khan was quoted as saying: “The 2019 to 2020 tax year is the last year UK residents will be required to pay the Capital Gains Tax for the sale of properties as part of the self assessment process and we want to make sure they are aware of the new requirements.”
This comment is taken from an HMRC press release on 24 November reminding taxpayers to declare gains made from residential property for 2019/20. The statement may make some sense in the context of the press release, but falls down when used as a standalone quote.
The issue I have with Khan’s statement is that 2019/20 is not the last year that UK resident taxpayers will be required to pay CGT on the sale of properties as part of the self assessment (SA) process.
From 2020/21 taxpayers will still be required to report and pay CGT in respect of disposals (not just sales) of property and other assets as part of their annual self- assessment, as Jacquelyn Kimber explained in June.
The difference from 6 April 2020 is that there is an additional reporting and payment deadline of 30 days from completion of the sale or gift, for certain categories of property, where a taxable gain has been realised.
However, what gain must be reported and when depends on whether the taxpayer is UK resident or not, and how the property is defined - see tables 1 and 2 below.
An early report of gains must be made online through the taxpayer’s UK property account, which is separate to, and in addition to, their SA tax return.
Unless the SA tax return has been submitted within 30 days of the disposal (which would be unusual) the taxpayer must report the same gain twice:
- On their UK property account and pay an “on account” amount of CGT
- On the SA return and pay any further CGT due, or reclaim any overpayment.
Table 1: UK resident individual
|Asset disposed of:||UK residential property||Non-residential and overseas land and property and all other assets|
|Report on:||UK Property account and SA return||Self-assessment tax return|
|Reporting deadline||30 days from completion||31 January following tax year end|
|Payment deadline||30 days form completion||31 January following tax year end|
|Rate of CGT:||18% or 28%||10% or 20%|
Table 2: Non-resident individual
|Asset disposed of:||UK residential property||Non-residential property held directly or indirectly|
|Report on:||UK Property account||UK Property account|
|Reporting deadline||30 days from completion||30 days from completion|
|Payment deadline||30 days form completion||30 days form completion|
|Rate of CGT:||18% or 28%||10% or 20%|
List 3 issues
The second item of confusing HMRC guidance was spotted by David Massey, lecturer in taxation at the University of Lancaster, and former HMRC inspector of taxes. It concerns the list of approved organisations and societies for which taxpayers can claim a deduction for the subscriptions or fees under ITEPA 2003, s343(1).
The HMRC guidance says the you can’t claim a tax deduction for the fee or subscription you “do not need to do your job”. This is a clumsy double negative, which implies the taxpayer can only claim a deduction for the membership fee or subscription if they need to pay it in order to do their job.
However, the law only requires that the “duties of the employment involve the practice of the profession to which the fee relates”. In other words, the membership of the society does not have to be a necessary condition for the job, but it must be related to the job.
Tax advisers may be members of the CIOT, and if they are the CIOT annual membership fee is a tax-deductible expense, under s343(1). But a tax adviser may practise their profession without being a member of the CIOT; it is not a necessary requirement of their job.
Any other errors?
Is it me or are these mis-statements becoming more common? If you spot any confusing or misleading HMRC guidance please let us know by commenting below. You can also report it through the “There is something wrong with this page” button as the foot of every gov.uk page.