Last updated 28 September 2020
Since April we have received a lot of feedback from members concerned about how to tackle the new UK Property Reporting Service used to report CGT arising on the disposal on or after 6 April 2020 of UK residential property. This note is intended to set out as much as we know about the practical process of reporting, based on publically available guidance and correspondence with HMRC. It has not been reviewed by HMRC.
We have focused on reporting for UK residents, but there are some comments on non-UK residents below as, since April 2020, non-residents have been expected to use the same online service in place of the old, online form.
Any further comments, corrections or feedback from members are very welcome. Please send them to atttechnical [at] att.org.uk.
- What are the rules?
- Can agents report on behalf of clients?
- Authorising the Agent - The Digital Handshake – a step by step guide
- What if my client is unable to complete the digital handshake?
- Reporting without an agent
- How to amend returns
- Reporting for trusts
- Reporting for estates
- Reporting for non-residents
Since April 2020 any UK resident disposing of a UK residential property who has CGT to pay, has to calculate, report and pay the tax within 30 days of completion. The report must be made online via the UK Property Reporting Service.
The relevant legislation can be found in schedule 2 of Finance Act 2019.
Yes. Agents can make a report on behalf of their clients, but they must be authorised specifically for this service. Any existing 64-8 or other authorisation is not sufficient to allow an agent to access the service.
The new service is digital and agents and their clients are expected to carry out a digital handshake to confirm to HMRC that the agent is authorised to act in this regard.
Guidance on the authorisation process is available on GOV.UK. The process assumes that the agent will have already set up an Agent Services Account (ASA). In addition, the client needs a new Capital Gains Tax on UK Property account.
With added commentary, the steps are as follows:
Step 1: The client creates a Capital Gains Tax on UK Property Account
Many people have contacted us assuming that the ability to set up a Capital Gains Tax on UK Property account (a ‘Property Account’) is within the Personal Tax Account (PTA). It is not. It is an entirely standalone service which can only be accessed from specific pages on GOV.UK. It cannot be accessed from within the PTA.
However, it is helpful if the client already has a PTA as they can use the same credentials (username and password) to set up their Property Account. We also understand that a sole trader with a Business Tax Account (BTA) instead of a PTA can use their BTA credentials to set up a Property Account.
Many people do not realise that an individual can use the same credentials for more than one service across GOV.UK. Equally they can create separate credentials for each service if they prefer – although it requires them to remember more sets of user names and passwords and exactly what they have used each set for on GOV.UK.
For a client with existing GOV.UK credentials, they should follow the green ‘Start’ button from the Report and pay Capital Gains Tax on UK property pages and then sign in with those existing credentials. Creation of a Property Account should take less than five minutes.
If the client does not have any existing GOV.UK credentials, then they will need to set up a Government Gateway account first and verify their ID. They should follow the same green ‘Start’ button but then click on the link underneath the sign-in box which says ‘Create sign in details’ and then follow the steps on screen to set up their username and password, before continuing on to create their Property Account.
At the end of the process, the client will be issued with a reference number for their Property Account. We understand this will be a 15-digit number in the format XYCGTxxxxxxxxxx or similar. The client should make a note of this, as they will need it for future steps.
Step 2: Client tells agent their details
Having created their Property Account, the client needs to send its 15-digit reference number and their postcode (or country of residence if non-resident – the same service can be used for non-residents) to their agent.
Step 3: Agent requests access
The agent logs into their ASA and selects ‘ask a client to authorise you’ to manage their Capital Gains Tax on UK Property Account.
The agent enters the details provided by the client which generates a time-limited link (it expires in 7 to 14 days) which they can send to the client by email.
(We assume that most agents will already have an ASA set up to deal with MTD for VAT or Trust Registration Service (TRS) matters. If not, guidance on how to set one up is available.)
Step 4: The taxpayer authorises the agent
The client receives the link and needs to approve the agent to act before the link expires. The taxpayer needs to use the same credentials (username and password) that they used in step 1. This will either be their existing credentials from a PTA/BTA, or the new credentials they created just for this service.
Once the client has authorised the agent, the agent should receive an email to confirm that their appointment has been accepted or rejected.
Step 5: The agent files the return
Once this process has been completed by the client, the agent should be able to manage the taxpayer’s Property Account on their behalf. The agent should be able to log into the client’s Property Account via their ASA and fill in the necessary details.
The return can be saved (completed or partially completed) for 30 days which allows the agent to go back to the client for more information or send it to the client for approval before filing if they would like evidence of client approval on their files. (NB A client signature is not required for the filing itself so it will not be necessary to forward any such approval to HMRC but it is good practice to retain evidence of the client having approved the return.)
Each time the agent logs back in to make a small amendment this extends the window for which the return is saved, meaning that the return will remain live for another 30 days.
Step 6: The taxpayer pays the payment on account
Following successful filing, we understand that both the agent and the client will receive a confirmation email from HMRC with details on how to pay the tax and what payment reference to use. The client can make a payment by logging into their Property Account. The client can make payment by debit card or bank transfer.
The agent should be able to check that payment has been made by their client by logging into the client’s Property Account via their ASA.
Many members have raised concerns about what happens if the taxpayer is unable to complete the steps above.
Some clients will be digitally excluded - i.e. completely unable to appoint HMRC online or manage their own Property Account due to age, disability, remoteness of location or for any other reason, including religious beliefs. These clients will be eligible for a paper return but can instead use the telephone process below to enable their agent to have access to their Property Account online if they choose.
Other clients will be digitally challenged – i.e. they do not fall within the criteria for digital exclusion but they will still struggle to handle the process by themselves. HMRC considers that this group should, with support, be able to complete the steps online. These clients will not therefore be eligible for a paper return, but we have been told that they should be able to access support from HMRC to authorise their client digitally. In practice, we consider it more likely that the agent will provide the necessary support rather than refer clients to HMRC and HMRC would certainly appreciate agents supporting their digitally challenged clients through the process.
We are currently seeking more guidance from HMRC on how the line is drawn between these two groups, as it affects the help they will get and how the agent tackles the process.
A paper return
A digitally excluded taxpayer can contact HMRC by calling 0300 200 3300 to ask for a paper return (form reference PPDCGT), which they could then ask the agent to complete.
Alternatively, it appears that an agent can request a paper return on behalf of a digitally excluded individual via the agent line. It is not possible to download a form – the agent must ring up for it.
If a paper return is needed, it makes sense to request it as soon as possible in the process. Taxpayers or their agents can request the form in advance of a sale.
We have received a number of reports that helpline staff may not always understand what is required, with the result that SA108 pages have been issued to the client or agent instead of the required PPDCGT form. We have raised concerns about this with HMRC, who have issued further guidance to helpline staff. Please let us know if you have problems accessing the correct paper forms.
Paper returns must be issued by HMRC
HMRC advise that agents should not try to obtain a copy of a paper return for one client and then simply reuse it for other clients. All paper returns should be pre-populated by HMRC with some of the taxpayer’s details before issue. Attempting to blank out another client’s details to reuse the form could result in it being rejected by HMRC. If the form is rejected, there is a risk the taxpayer will not be able to report in time and could receive a penalty.
The paper return will have a space for the Property Account reference number. For a client’s first report, where the client has not set up their Property Account online because they are digitally excluded, this will be added later by HMRC when the form is processed and so can be left blank. Where a paper return is used for any amendments – or subsequent disposals - this box should be completed as the Property Account reference number should be known by that stage as it will have been included on correspondence from HMRC resulting from the first paper return.
Requesting a paper return will delay what is already a time-pressured process, given that it needs to be posted to the client and then back to HMRC for processing before a demand can be issued to the taxpayer. HMRC tell us that they will ‘stop the clock’ (i.e. pause the 30-day count from completion date of the property sale to submission deadline) during the period between their receipt of a completed paper form and the issue of a demand so the taxpayer is not penalised for the parts of the reporting and payment process which are outside of their control.
We understand that this ‘stop the clock’ will also include some allowance for outgoing post which can take up to 10 days to reach the taxpayer - although the exact details of how this will work are unclear. If members or their clients experience any problems arising from postal delays, please let us know.
Telephone authorisation process
As an alternative to issuing a paper form, in discussions HMRC have told us that they will assist both the digitally excluded and the digitally challenged to appoint the agent by phone (although the steps below have been described in HMRC correspondence as applying only to the digitally excluded).
While this is a more time consuming route for agent and client, it could be more beneficial in the long run as the result is that the agent gets full access to the digital service on behalf of their client. This might be worthwhile where a client has a number of properties to sell, where amendments might be needed or if the agent wants to check tax payments have been received.
The type of help given on the telephone will depend on whether helpline staff consider the individual is digitally excluded – so that all the work needs to be done by HMRC - or if they can be assisted and supported by HMRC or a third party (agent, family or friend) to set up Government Gateway credentials and manage it online themselves.
The determination of whether an individual is excluded or challenged will be made by the HMRC helpline staff who will triage calls to the Extra Support team to give the appropriate support. The test for digital exclusion, as noted above, is the same as for MTD for VAT and clients may be asked to explain why they consider themselves digitally excluded.
We have asked HMRC for more guidance on how they are determining whether taxpayers fall into digital exclusion or digital challenge as the Extra Support team is very small and could be overwhelmed by requests for help.
In practice, agents may prefer to assist their digitally challenged clients themselves where possible to get through the handshake, rather than pass them over to HMRC.
HMRC have provided us with the following steps for a digitally excluded client to give their agent access to their Property Account:
- The agent asks their client to contact HMRC Taxes helpline on 0300 200 3300 to register for a Property Account (ask for a CGT on UK Property Account).
- HMRC Taxes helpline advisor will confirm that client is digitally excluded and refer customer to HMRC Extra Support Service.
- HMRC Extra Support Service advisor will help the client register for a Property Account. This process will be done by phone or face to face, as appropriate.
- The registration process will result in the client receiving a Property Account reference number. The reference number will be created in real-time and provided to the client.
- Client gives the Property Account reference number to their agent to begin the agent-client authorisation process.
- Agent logs into Agent Services and selects ‘Ask your client to authorise you’.
- Agent enters their client’s Property Account reference number, creating an invitation link. In the normal digital handshake process this would be emailed to the client to follow. We presume that the link doesn’t actually need to be sent out for a digitally excluded client, just created at this stage so it is on HMRC’s systems. (It would be emailed to a digitally challenged client, even if they have to seek HMRC/agent support to follow it.)
- Client contacts HMRC Taxes helpline again (0300 200 3300) to request support to authorise their agent to access their Property Account (again, in full, the CGT on UK Property Account)
- HMRC Extra Support Service advisor uses client’s Property Account reference number to identify agent-client authorisation request.
- HMRC Extra Support Service advisor confirms client is happy for agent to act on their behalf.
- HMRC Extra Support Service advisor creates agent-client relationship.
- Agent is able to engage digitally with HMRC on behalf of client for CGT property disposals.
This guidance is not going to be added to GOV.UK. It is currently available on the Agent Forum and we have asked for it to be included in a future edition of HMRC's Agent Update so that agents can brief their digitally excluded before they contact HMRC.
We understand that the same approach can be followed for a digitally challenged client, but they may be expected to complete the online steps themselves, with support from HMRC. Again, the agent may prefer to assist if they are in a position to do so and HMRC would appreciate it if the agent could assist.
Taxpayers can report their gains without an agent if they wish. To do this, they would need to set up their Property Account as described in Step 1 above. Where an unrepresented taxpayer is digitally excluded, they can request a paper return or opt to complete the whole process of reporting the gain over the phone with the Extra Support Team.
Further instructions and guidance for taxpayers tackling their own reporting can be found on the LITRG website.
The new service does not yet have full functionality so it is not currently possible to amend any existing returns online. If a taxpayer or agent wishes to amend an earlier return, it will be necessary to call HMRC and request a paper return.
We are anticipating that this functionality will be introduced later this year.
UK trusts fall within the new reporting rules and therefore trustees may also need to report residential property disposals within 30 days of completion if there is CGT to pay.
A number of members have queried the interaction between the CGT reporting service and the Trust Registration Service (TRS) where the trust is not already registered on the TRS. HMRC have confirmed that a trust will need to register on the TRS prior to reporting the property disposal so that the trust can provide either a UTR or a Trust Registration Number as part of the CGT reporting process.
Since a UK CGT liability will always trigger the requirement to register on the TRS, trustees are not being asked to do anything that they would not otherwise have had to have done. The main issue is one of timing, as trustees would usually have more than 30 days to register a trust on the TRS under current rules.
The current deadline for a trust to register on the TRS is 31 January following the tax year in which the UK tax liability arose. This later deadline is effectively overwritten by the demands of the 30-day property reporting requirements and means trustees must tackle the TRS sooner than they might otherwise have done.
In future, when the TRS is expanded to include more trusts, the interaction of deadlines will become less relevant as fewer trusts will be unregistered.
Estates disposing of property fall within these rules, with personal representatives (PRs) required to report property disposals within 30 days of completion where a gain arises.
When it launched in April, the property reporting service was not available to PRs. It has now been expanded, and guidance on how unrepresented PRs can tackle the process is available, under the heading ‘If you’re a capacitor or personal representative’. (NB Capacitor is a new term and we have queried its introduction with HMRC. It does not appear to encompass agents.)
The guidance covers the position where a PR is making the report. They are advised to do this using their own Property Account. When starting a new report, the taxpayer is given the option of reporting on behalf of:
- Someone they are helping
- An estate as a personal representative
Obviously an agent will not have a Property Account in the name of the agency - they only have a ASA. The ATT has requested guidance on how an agent appointed by PRs shoud report on behalf of the estate.
There is no equivalent method for an agent representing a PR to report on behalf of the PR. We have requested guidance from HMRC on this point.
In the meantime, in the current absence of any guidance, we are assuming that agents effectively cannot report digitally for estates and should request a paper return in these cases.
Interaction with informal procedures
A further concern for estates is the interaction between the reporting requirements under the 30-day reporting rules, and the informal procedures for an estate.
Under the informal procedures, a non-complex estate does not need to register for a UTR (which would be obtained via the TRS), but instead the PRs or their agent submit an account by letter after administration is complete.
Informal procedures are available provided that the total tax due under self-assessment (i.e. CGT and Income tax) for the entire administration period is under £10,000, the estate is under £2.5m and the value of assets sold in any tax year are under £500,000. The idea is that this informal approach is simpler and more cost effective than completing tax returns for the period of administration.
It is therefore possible for an estate to make a property disposal such that it remains within the informal procedures (so no need for self-assessment or a UTR) but still be within the rules for reporting and paying CGT within 30-days on a residential property disposal. HMRC have recently confirmed that such an estate can still benefit from the informal procedures and will not be forced into self-assessment as a result of the property reporting requirements.
In these cases, a PR reporting on behalf of the estate would create a Property Account in their own name using their own credentials. Once logged into their account, they will be able to submit a CGT Return on behalf of the estate, by providing personal details for the deceased which could (but does not have to) include the deceased’s UTR.
When the estate then makes a payment of the balance of CGT and Income tax for the administration through the informal procedures, the PRs will need to quote any reference numbers relating to the earlier CGT payment to enable HMRC to link both payments together. This may include the PRs Property Account, although care will be needed if the PR has also reported gains made in their own name.
Again, how this process works when an agent is acting for the estate and doing the reporting remains to be clarified.
Finalising the estate’s affairs
As a final comment, in their August 2020 Trust and Estates newsletter HMRC note that if the estate opts to finalise its wider tax affairs (i.e. files a self-assessment return or makes a report under the informal procedures which includes the CGT on the property disposal) within 30 days of completion of the property sale, then there is no need to report via the Property Account at all. This will potentially be of benefit in those cases when the property sale occurs just before the estate administration is completed.
Non-resident individuals have had reporting requirements (whether or not CGT is at stake) since April 2015 for disposals of UK residential properties. Their obligations were expanded in April 2019 to cover direct and indirect disposals of all UK land. On 6 April 2020, the reporting route for non-residents was also moved to the UK Property Reporting Service.
The process for non-residents generally follows that for residents. The primary issue for non-residents is establishing their identity in order to create a Government Gateway account.
HMRC have recently updated the system to make it easier for non-residents to verify themselves online. However, if members are continuing to experience issues with access for non-residents please send us examples where this has proved difficult – or impossible – and we can feed this back to HMRC.
Where a non-resident does not have a NINO or UTR there is an alternative process to enable the creation of access credentials.
There are still a number of areas where more clarity is needed and we will be working with HMRC to address areas where we consider that there are gaps in the guidance so we can update this note.
On a number of occasions above we have asked members for comments and atttechnical [at] att.org.uk (views are welcome), particularly of any concerns or gaps that we have missed.
Finally, given the challenges in reporting and the tight deadlines, we would recommend that members document the reasons for any delays during the reporting process which could help to support a reasonable excuse claim in the event of penalties for late reporting.