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.
You might also be interested in
Replies (30)
Please login or register to join the discussion.
Yes Rebecca. Spot on on the CGT mis-statement by Karl Kahn. The web page contains a box at the footer asking if there is anything wrong with the page. You can use this to report inaccurate information and I did so on the date of publication. Now all we need to do is mount a campaign against the not fit for purpose 30 day reporting "facility".
It certainly is not fit for purpose - from what I've seen it should be scrapped and start again or preferably forget the whole thing.
The 30-day reporting is optional. I kid you not. I came across a page on GOV.UK that said:
'You can either:
x report and pay on your Self Assessment return for the 2020 to 2021 tax year
x report and pay now using our online form'
So I took a screen shot and have opted for the first and if HMRC tell me off I'll send them my GOV.UK screen shot.
Yes Rebecca. Spot on on the CGT mis-statement by Karl Kahn. The web page contains a box at the footer asking if there is anything wrong with the page. You can use this to report inaccurate information and I did so on the date of publication. Now all we need to do is mount a campaign against the not fit for purpose 30 day reporting "facility".
The one that gets me is when you do the "calculate how much tax I owe" when submitting a personal tax return, and it fails to deduct the amount you've already paid on account. I've gradually got used to that one, but it scared me stiff the first few times it happened.
Totally agree. It is rediculous that the tax calculation does not contain the amount already paid. I presume that different systems do not talk to each other and another interface between payments on account made and tax calculations is not high on HMRCs agenda.
Client of mine rang me up the other day in a panic after receiving updated tax calculations for the last two years. He thought he owed more tax as there was no mention of the payments he'd made. In fact HMRC now owed him money!
The statements they put together are very misleading. If I'd supply something like that to my clients I'd be fired.
Karl Khan was interim director general for HMRC's customer services last month . Is he still there I wonder ? You really cannot have people in such roles , making themselves look a complete and utter fool with incorrect statements regarding the legislation.
Perhaps a sideways move to the HMRC telephone helpline is called for.
Can I please check, under Table 1 - the rate for UK residents owning overseas Land & property - the tax rate for this will be 18/28%, rather than 10/20% shown?
I agree for other non-land/property assets it will be 10/20%.
The 30 day rule for reporting residential property disposals and paying any tax is a farce.
No one sets up a 'UK property account' unless they need to.
Most people aren't even aware they need to unless told by their solicitors, so by the time they find it it's impossible to meet the 30 day deadline.
If they want to make the system work, then solicitors should tell their client immediately on instruction that there is a reporting requirement and solicitors should be legally obliged to file a report- so the first question they ask a client is 'who is your tax adviser'. The report can then be filed with the SDLT Return and tax payable deducted from the proceeds- so it will encourage clients to contact us early so we can calculate the gain (if any) and provide figures in good time for the solicitors.
The current system is not fit for purpose.
If I may add, it's worse for foreign trustees disposing of UK land & property.
To set up a CGT account they first need a TRS submission reference (it's not possible to setup a CGT account for a trustee without this reference).
So now they need to register a trust first to be able to file a CGT return in 30 days.
Talk about making things absolutely difficult. Registering a trust is not an easy or fast process in the first place.
Non-residents making a reportable disposal, absent a UK address or phone number (not unreasonable to assume that a non-res will have neither) can't set up the UK Property Account in the first place.
The bigger whopper though is the statement in the Press Release, also attributed to Khan, that "We’re making it easier for customers to pay any tax that is owed." That may conceivably be true of those outside SA who otherwise would in theory be required to notify liability so that HMRC could issue a simple assessment, but is patently untrue of those who would have reported the gain and paid the tax in the usual easy way on their return.
Of course it's not really Khan's words but those of the Press Office, who can mangle any truths they are told until they are unrecognisable - I know, I had that experience in HMRC.
The bigger whopper though is the statement in the Press Release, also attributed to Khan, that "We’re making it easier for customers to pay any tax that is owed."
That is certainly not true for those who are not computer enabled. I've had to ask for paper returns for two clients already, which was a pain, and they have not yet processed one that was sent in three months ago, leaving the client with no idea when he will be able to pay the tax!
Had to file two paper Returns in July because it was impossible for various reasons to sign up for the online process - both processed at the end of November - over 4 months.
God knows how many other returns should have been done but people not aware! Agree wholeheartedly with previous comment that conveyancing Solicitors must warn clients about this because to even have a glimmer of hope of meeting the 30 day deadline the process needs to be started immediately.
Oh and I expect this chap Khan will eventually leave with a Knighthood despite the fact so many parts of HMRC systems remain a shambles, if not getting worse. Considering how well I think HMRC did generally with the CJRS and SEISS systems it only goes to show how dreadful the rest is.
Rant over!
What does a taxpayer do then if
1. There is a property sale completion (say August) which (after annual allowance) gives rise to a Capital Gain, and then
2. Has a further sale completion (say December) which results in a loss.
Presuming that the taxpayer is compliant and has reported and tax has to be be paid (after the first completion) at what rate of tax is paid ? The taxpayer does not know for certain what his/her rate will be as the tax year has not ended; and how does the taxpayer recover any overpaid tax if the Loss is greater than the gain?
Seems an absolute farce!
The rate of tax is what it would be on the assumption that (1) the only gains and losses on residential property (RP) that need to be taken into account are those made before completion date (2) losses on non RP assets before completion are taken into account (3) but no account is taken of gains on such assets - see para 7 Sch 2 FA 2019.
If a later loss on RP arises, it can be set off against the previous gain and any tax repaid - see paras 8 & 9 ibid. The loss can of course be less than the gain and some tax would be repaid. You can make a return of the loss for this purpose.
At least that's how I read it.
The background to HMRC Brief 19/2020 states: "This result is contrary to the operation of the VAT system." It is not open to HMRC to say that; only a Court of Law can determine whether a result is contrary to the operation of VAT. In fact, the Brief was released precisely because a Court of Law held that the result was not contrary, etc., etc.
And this is a surprise?
HMRC interpret the law according to their needs.
On behalf of clients we interpret it according to clients' needs.
Often the two interpretations agree, but if you have a query it always pays to look at the Regulations,
Otherwise there would be no point to Tax Tribunals.
But do not blame HMRC.
For excellent reasons we do not permit the Police to make law. (If you cannot think of at least ten reasons, put yourself in a corner wearing a Dunce's cap)
A police officer has only to break wind in the wrong direction and some parliamentary or legal person will jump on him.
Sadly those same parliamentary persons and or legal persons would rather eat worms than properly supervise HMRC.
The consequence is HMRC is in daily practice a law unto itself.
We should rather be relieved that HMRC executive restrain themselves to a great extent.
See above comment re Police and Law.
I used the 'what's wrong with page' earlier today about the £500 Test & Trace payment to low earners. The page on GOV.WALES makes it clear the payment is taxable and not nicable, but the same page on GOV.UK is silent on tax. Maybe this isn't a HMRC page but since HMRC abandoned hmrc.gov.uk I don't know which pages are HMRC and which are not.
How do the UK Property accounts work for jointly-owned property?
I have a H&W client with 7 properties jointly owned and 4 owned solely by one of them.
I assume they each need a UK Property account but if a joint property was sold how would they report it?
Each report 50% on their respective accounts? Will HMRC's systems cope with this?
The jointly owned properties are not in a partnership with its own UTR but if they were how would that work bearing in mind partnerships don't pay tax, individuals do?
Since each joint owner has an asset and each disposes of an asset, each being a separate taxpayer (even husbands and wives since the 1980s) has to have their own UKPA to report their gain on their share.
Partnership makes no difference - see s 59 TCGA 1992. After all partners are joint owners too.