In search of the CGT reporting tool
Gains on residential property must now be reported, and the tax paid, within 30 days of the sale. But finding out how to report the gain is not an easy task, as Neil Warren explains.
A minor outcome of the Covid-19 crisis was that an agreement I had to sell a flat in March 2020 fell through, so I had to find another buyer, and the sale eventually completed in August. This had two unfortunate outcomes:
- The £40,000 lettings relief allowance was abolished on 5 April 2020, which would have averted a capital gains tax (CGT) bill. I lived in the property for some of the period of ownership.
- I had to do a CGT return and pay the tax within 30 days of the sale. This is a new requirement for gains arising on residential properties from 6 April, where the seller is a UK resident.
Where is the return?
My first thought was that all I had to do was log into my personal tax account with HMRC and there would be an easy-to-find tab somewhere on the home page, saying something along the lines of “Capital Gains Tax Property Return.”
That was perhaps over-optimism on my part as I frantically searched for a link. I felt like a hen scrabbling in the dirt for scraps but still no joy.
I therefore decided to log into my agent account and go to the link for my personal self assessment tax returns. In effect, I am a client of my own company for self assessment purposes. This proved abortive as well.
I was beginning to think that I would have to call HMRC’s helpline for a steer. But then I had a brainwave: I had dealt with a client’s pension query earlier in the year, when I was frantically looking for his HMRC Lifetime Allowance Protection Certificate in his personal tax account. I remembered that I cracked that problem by going into his personal tax account but through a different route, the electronic back door.
I googled “CGT UK property account” and chose the option of “Report and pay Capital Gains Tax” followed by “Start” and bingo, it all works and I could create my account. I had to enter the 12-digit government gateway code and password for my personal tax account. When you are doing this don’t forget to click on the link that confirms you sold the property on or after 6 April 2020 and not before.
Tip: Check the date the contracts were exchanged for the deal, as this is the date that fixes the CGT tax point, although the reporting deadline runs from the completion of the deal, which may be some weeks or months later.
Once I had found the return, the rest of the process was easy. The questions are very logical and it is just a case of entering the relevant numbers for buying price and selling prices; costs linked to both eg estate agent fees on the sale and legal expenses for both; improvement costs could also be entered. It also required the buying and selling dates and address of the property.
The CGT return asked for an estimate of my projected income from other sources until 5 April 2021. This is understandable because the taxpayer’s total annual income determines the rate of CGT that is due on property gains; 18% for basic rate taxpayers and 28% for higher rate taxpayers.
At the end of the process, I entered the amount of credit I wanted for main residence relief, including the last nine months of ownership, and also how much of my annual CGT exemption of £12,300 I wanted to use. After all this was done, it told me the CGT that needed to be paid, which agreed to my own calculation.
As the old saying goes, if you know where the treasure is hidden, you can get rich very quickly.
I hope this article will help you or your clients find the entrance door a bit quicker than me, in order to submit a CGT return on property disposals within the new one-month deadline.