Latest update 2 September 2021: Since the previous iteration on 26 July we have noted a change to the time allowed to make payment following submission of a paper return and receipt of a demand from HMRC. We have also updated our comments on the trust section to make more reference to the effect of 5MLD.
Last updated 2 September 2021
Since April 2020 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 of UK residential property on or after 6 April 2020. This note is intended to set out as much as we know about the practical process of reporting, based on publicly 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 previous, online web-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?
- Guidance from HMRC
- 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
- Interaction with self-assessment
- Reporting for trusts
- Reporting for estates
- Reporting for non-residents
- Other practical points including
- Making a payment (including on a paper return)
- Reporting disposals of residential and non-residential properties
- Deleting or canceling a return
- Reporting the disposal on a subsequent self-assessment return
- Completing self-assessment prior to deadline of property return
- Interaction with top slicing
- Claiming Business Property Relief on self-assessment
- Supporting evidence
- Reasonable excuse
- 2021/22 reporting issues
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.
The rules for non-UK residents share similarities with the rules for non-residents but crucially non-residents required to report not just disposals of residential property, but all disposals of UK land whether or not they realise a gain and including disposals of shares in property-rich entities. There is detailed guidance on the rules from April 2019 onwards in HMRC's manuals.
On 13 July, HMRC published an FAQ document which contains further details on various aspects of the service. Further guidance on estimates and amendments is expected shortly. This followed the publication of their workaround for repayments published on 28 June, discussed below.
The issue of the FAQ follows discussions between HMRC and the Issues Overview Group (IOG). The IOG includes representatives from a number of professional bodies including the ATT and exists to identify widespread operational issues that need to be escalated within HMRC. The IOG identified the UK Property Reporting Service as a particular source of concern earlier in 2021.
The ATT have asked for detailed guidance on the service (both how to use it and in relation to technical aspects) to be made available on GOV.UK (and/or HMRC manuals). HMRC are in the process of updating all the guidance on the UK Property Disposals service as well as exploring a longer-term resolution to the offsetting issue. We have a series of meetings with HMRC on guidance scheduled over the summer months and on into autumn and we look forward to working with HMRC to improve and increase the available guidance on the service. We are grateful to the HMRC staff who have listened and taken on board our concerns about the practical operation of this service and are working with us to try and improve deficiencies in guidance.
Until more guidance is available on GOV.UK we will continue to update this guide as and when we learn more.
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 online 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.
Where the taxpayer is unable to use the digital service, HMRC have recently confirmed that existing 64-8 authorisation should be sufficient to allow the agent to discuss a paper form on HMRC helplines. If members have any issues in this regard, please let us know.
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 (i.e Government Gateway 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 Government Gateway credentials for more than one service across GOV.UK. Alternatively, 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.
Note: A number of cases have been reported of individuals who have been unable to set up a Government Gateway because they have no passport or credit history and therefore - despite being otherwise quite capable of using the digital service - cannot get through the verification process. In these cases, these individuals (or their agents) will need to request a paper form.
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 Property Account reference details provided by the client, plus the client's postcode, 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 specifically 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, both the agent and the client will receive a confirmation email from HMRC.
The client can make a payment by logging into their Property Account and settling the amount due by debit card or bank transfer. It is also possible to pay by BACs - see the 'Other practical points' for more details.
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. (Equally the client can confirm payment has been received by logging directly into their Property Account. Details of payments are available on the dashboard.) Allow 3-5 working days for the client's account to be updated with payments.
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. The intention was that these individuals should be able to access support from HMRC to authorise their client digitally but the proposed process is not currently available so 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 did seek more guidance from HMRC on how the line is drawn between these two groups but it is challenging and members are not reporting issues getting paper returns when required so we are not currently pursing this issue. But if members are having issues obtaining paper returns for clients they feel should be eligible please let us know and we can pick this up again.
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, 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.
In the early months of the system in 2020 we received a number of reports that helpline staff did not always understand what was required, with the result that SA108 pages were issued to the client or agent instead of the required PPDCGT form. We raised concerns about this with HMRC, who issued further guidance to helpline staff and as far as we are aware, this issue has now been resolved. 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.
Until the paper form is processed and a payment reference is received, it is not possible to make a payment. If payment is accidentally made on any existing self-assessment record it will be necessary to contact HMRC to ask it to be moved and reallocated.
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 so that they can pay the tax due. HMRC appreciate this and 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. Following discussions with HMRC, from 9 August 2020, taxpayers who have submitted a paper return will be given 30 days to pay from the date of issue of the demand.
Telephone authorisation process
UPDATE June 2021: We have been advised that the method below is not currently live and we do not have a timescale for when it will be. In the meantime, members will need to use paper forms for anyone unable to manage the digital service.
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 functionality to amend returns online was introduced on 14 October 2020. This facility only applies to returns which were originally submitted online, and it will be necessary to request a further paper return to amend any returns submitted on paper. Individuals managing their own affairs, and agents acting on behalf of a client should be able to access their/the clients property accounts and click on 'View or change return' under the Sent Returns section, and then click on 'Change return' at the bottom of that screen.
Amendments can only be made in specific circumstances (see paragraph 15 of Schedule 2 of Finance Act 2019) . These include if:
- the estimate of the individual's income changes so the rate of CGT which applies is changed
- the value of any figure which has been estimated or apportioned becomes known
- it becomes reasonable to conclude that a relief under TCGA 1992 (for example hold over relief) will now apply
- a provision of TCGA 1992 will now apply because of the individual' s residence status.
Other amendments relating to things not known at the time of the original disposal (for example capital losses which occurred after the disposal completion date) must generally be dealt with through self-assessment as paragraph 19 of Schedule 2 of Finance Act 2019 restricts what amendments can be made to the property return.
In addition, once the individual's self-assessment return for the year in which the disposal occurred has been submitted, it is not possible to make amendments to any property returns made in that tax year. In effect, the self-assessment return will supersede the property returns. (HMRC confirmed in their July FAQ that amendments cannot be made once the self-assessment return has been submitted.)
Individuals who are not in self-assessment have 12 months from 31 January following the tax year of disposal to amend their property return.
Interest on additional tax payable
It is possible that an amendment may result in additional tax being payable. HMRC have confirmed that, provided reasonable estimates were used at the time of the report, interest will not be charged if the payment on account is subsequently found to be insufficient – as long as the box highlighting that the return contained an estimate was ticked. HMRC have said they will charge interest if an estimate was used, but not indicated on the return.
In practice, since it will be necessary to estimate the income figure at the time of the return in almost all cases as the return is being made before the end of the tax year, we expect most returns will need to indicate that an estimate has been used.
NOTE: HMRC will not issue reminder to anyone who has indicated that an estimate was used on the return. If the estimate needs updating, it is up to the taxpayer/their agent to keep track of this.
The SA108 pages for 2020-21 have been updated to include two new boxes - Boxes 9 and 10 - in the residential property section. In general, UK resident taxpayers should report the total of any disposals of UK residential property in box 9 and the total tax payable through the system in box 10. (The gains or losses should also be included in boxes 6 and 7 as appropriate.) The 'white space' in box 54 should be used to report the reference numbers of the property returns. (These instructions do not apply if the individual is entitled to Business Asset Disposal Relief (BADR) – see the separate note below under ‘Other practical matters’).
As noted above, our understanding of the legislation is that amendments to the property return can only be made in specific circumstances and that for those in self-assessment, final adjustments to the return figures are made via self-assessment.
We have received a number of reports from members raising concerns that where the final CGT figure is higher than that demanded on the property return, the self-assessment computation includes the extra tax due, but where the final CGT on residential property is less than that reported on the property return, this does not generate a refund, and instead the computation simply shows a nil amount for CGT. Members asked how, in these instances, a refund can be obtained. We raised this with HMRC and details of the approach to take can be found here. Members may also find questions 7 to 11 on HMRC's July FAQ document helpful.
In effect, repayments will not be issued automatically unless they are reported via the Property Return and the original payment was made by a card payment. In all other cases, it will be necessary to contact HMRC to arrange for a repayment or for sums to be off-set against other self-assessment liabilities.
We are aware many members will be dissatisfied with the proposed approach, but because of the way HMRC's systems are set up, it is currently impossible to automate a solution. We are in discussions with HMRC on whether processes can be improved for future years.
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 taxable trust to register on the TRS is 31 January following the tax year in which the UK tax liability arose, although this is reducing to 90 days from the date of acquiring a tax liability from 1 September 2022. The later TRS deadlines are therefore 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. As the TRS is expanded to include more trusts following the introduction of 5MLD, with non-taxable trusts required to be on the register by 1 September unless specifically excluded, the interaction of deadlines should 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.
Reporting by the PR themselves
When it launched in April 2020, 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 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
Having selected the final option, subsequent screens will ask for details of the estate. On completion, the PR should receive a submission receipt.
*Health warning* As an additional complication in these cases, we understand that once the CGT return has been submitted, for administration cases only, it goes into a manual system. This means it will not be possible for the PR to see the submitted return when logging back in in order to make payment within the expected 30-day period. HMRC guidance has been updated to advise personal representatives that 'You should download or print a copy of the return for your records. This is because once the return has been sent to HMRC it will not be available online to view or amend online.'
HMRC will instead write to the administrator/PR requesting payment separately and giving a new time limit for payment. The PR can expect to be asked to pay within 30 days of HMRC issuing the demand as for all other paper returns.
We presume this is to keep the payment of tax which is a liability of the estate being accidentally offset against any personal tax liabilities for properties disposed of and reported to the PR on their account in their personal capacity.
Reporting by an agent
An agent will not have a Property Account in the name of the agency - they only have a ASA - which means they cannot follow the steps above.
In effect there is no specific functionality for agents to report digitally on behalf of estates/personal representatives and there is unlikely to be any such functionality in the near future - which leaves agents using paper forms in these cases.
However, since anyone with a property account has the option of reporting on behalf of another person, HMRC have noted that it is possible for the executor to use their own, personal property account to report the disposal by the estate, and appoint an agent to do this via the usual digital handshake.
There are some caveats to this approach which are flagged in the HMRC guidance:
- The agent will be able to see any reports of disposals made personally by the executor – which will not be appropriate in all cases.
- Appointment of the agent for the estate will displace any agent previously appointed for the executor’s personal affairs.
Digital reporting for an estate will therefore only be suitable where the agent also acts for the executor in a personal capacity. Where the executor is a professional such as a solicitor, then the paper form will probably remain the best approach.
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 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.
When an agent is acting for the estate and doing the reporting on behalf of the estate it will be necessary to report on a paper return.
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.
Where a non-resident does not have a NINO or UTR there is an alternative process to enable the creation of access credentials.
If the non-resident does have a NINO or UTR, then as part of the process of setting up a Government Gateway they will be asked for a UK address – which they may not have. In these cases, HMRC has advised that the taxpayer should call the helpline on 0300 200 3300 to be talked through the registration process for non-residents unable to pass verification.
If online access cannot be achieved, a paper form will be needed. We understand this can be a challenging process too – especially if a 64-8 has not yet been registered (for example where a new client who has made a recent disposal has been taken on) as HMRC will send the paper form to the client’s home address overseas. The consequent postal delays introduced will make meeting the 30-day period challenging in many overseas cases.
Where members continue to experience issues with access for non-residents please send us examples where this has proved difficult – or impossible – so we can feed this back to HMRC.
Making a payment
Payment of in-year CGT needs to be made and allocated to the taxpayer's Property Account - not via the usual self-assessment route.
During the process of reporting, the taxpayer will be issued with two payment references at different stages of the process:
- The 'payment reference number' which relates to the individual CGT return.
- The 'payment reference' (which is the same as the Property Account reference).
The former allows the taxpayer to make a payment in respect of the tax due on an individual return. The latter allows the taxpayer to make a single payment to cover the outstanding tax on all the returns submitted on that Property Account.
HMRC have confirmed that taxpayers can make payment using either reference number and it will be allocated to their account.
HMRC have also confirmed on the Agent Forum (see thread CGT-7491) that more care with references needs to be taken when an individual has used their Property Account to report on behalf of another person as a capacitor - for example if they have reported on behalf of a family member or an estate. In these circumstances, the individual 'payment reference number' should be used to ensure that the correct funds are allocated to the relevant submission and not allocated to any other disposals that individual may have reported themselves.
If the client is able to engage digitally with HMRC, they can settle the tax due by logging into their Property Account and following the instructions to settle any outstanding tax via debit care or obtain details to settle by bank transfer. They can also log into their account to confirm that payment has been received and matched to their account once the payment has cleared in 3-5 working days.
Making payment following submission of a paper return
Where a paper return has been filed, it may take some time for the payment reference and demand to be issued. HMRC have confirmed that penalties will not be issued for late payment in these cases (although late filing penalties might apply if the paper return is filed outside the 30-day window). Payment will be demanded within 30 days of the issue of the manual charge. (Previously 14 days was allowed - this was extended to 30-days following representations by the ATT.)
HMRC have acknowledged that there is currently a large backlog in processing paper returns. We are currently trying to establish the extent of the delays as anecdotal reports have ranged from three to six months.
Reporting disposals of residential and non-residential properties
When a taxpayer disposes of a property which is partly residential and partly non-residential, it is necessary to determine the residential element of the gain and report it within 30 days. For the purposes of the form, the gain should be split between the residential and commercial elements first, before starting to report, and only the residential element included on the form. It is not possible for example to report the entire gain on the property, and then split out the residential part at the end of the process.
Deleting or cancelling returns
It is not possible to delete or cancel a submitted return. In the unusual circumstance of requiring to delete or cancel a return which has been submitted erroneously, HMRC have advised via the Agent Forum (thread reference CGT-8411) that the correct approach is to contact HMRC and ask them to update the system manually.
Reporting the disposal on a subsequent self-assessment return
Where the individual is also within self-assessment, it will be necessary to report the disposal twice - once within 30 days and then again on the relevant self-assessment return. HMRC have confirmed that CGT computations for disposals in 2020/21 will not be pre-populated into 2020/21 self-assessment returns, but HMRC is looking into the possibility of pre-population for future SA returns.
Completing self-assessment prior to deadline of property return
In a very few limited cases it may be possible for the individual to report the gain just once, via their self-assessment return. In these cases the obligation to file a property return is avoided because the individual is able to file their self-assessment return before the 30-day deadline for the UK property return. For example, if the exchange occurred on 2 February 2021, so that the disposal occurred for CGT purposes in 2020/21, but completion only occurred on 31 May 2021, the individual would have until 30 June 2021 to make their property report. If they were able to submit their 2020/21 self-assessment return prior to 30 June 2021 (and that tax return included the property disposal), then this removes the obligation to complete a property return as well. It appears this will then mean the original 31 January deadline would apply for any CGT due. HMRC have been made aware of this feature of the legislation.
Interaction with top-slicing
Where an individual has both a chargeable event gain (CEG) from cashing in all/part of a life insurance policy – plus an actual chargeable gain to report via the UK Property Service - then any top slicing which applies to the CEG might impact on the rate of tax that applies to their capital gain and consideration needs to be given to how this is reported.
When it comes to reporting the disposal via the UK Property Reporting service, the individual is asked for their gross income for the tax year. They might well conclude that their total income, includes the full value of any chargeable event gains.
In fact, for the purposes of determining the amount of available basic rate band (which affects which tax rate to apply to any gains) it is only necessary to consider the top slice of their chargeable event gain.
It’s probably best illustrated by example. In 2020/21 a UK individual has £15,000 of employment, and makes a £5,000 chargeable event gain. They also sell a residential property. When calculating the CGT on the property they need to know how much is taxable at 18% and how much at 28%. With the figures given, they might reasonably take their gross income to be £20,000 and conclude that they have £30,000 of basic rate band available – so that a gain on a residential property of £40,000 after allowances would be taxed £30,000 at lower 18% and £10,000 at 28%.
However, for the purposes of the CGT rates applying to the gain, they only need consider the ‘top slice’ of their life insurance policy. Let’s say that this has been held for 5yrs, so the top slice is £1,000. For CGT rate purposes the individual has only used up £15k + £1k = £16k of basic rate band and £34,000 of the gain can be taxed at lower rates.
The service asks for the individual’s gross income and the notes warn individuals not to include ISA income, tax credits etc. However, care should also be taken when the individual has any chargeable event gains. Either they need to adjust the figure here from the question that is asked to reflect the impact of only including the top slice of any CEGs, so the calculator gives the correct figure for tax, or, if the individual reports the gross income in as including and CEGs in full, and then provides an alternative tax figure later on, and a computation to explain how you got there.
We have asked HMRC to confirm in the next iteration of the FAQs which is the preferred route.
For those in self-assessment, most software packages should make the necessary adjustments automatically and any differences will be corrected at this stage. But individuals not within self-assessments with a CEG could easily miss the point, and the service will not pick it up for them as it doesn’t ask for a breakdown of their gross income figure.
Claiming Business Property Relief on self-assessment
BADR can be claimed on the Property Return itself by selecting ‘other’ in the reliefs section and manually overriding the CGT figure. A computation showing how the CGT has been calculated will be required.
When it comes to self-assessment, further steps will be needed. As noted, under interaction with Self-Assessment, for UK Residents who are reporting disposals again as part of their self-assessment the gains need to be included in boxes 6 and 7 as required and the total of UK residential property disposals and tax paid separately identified in boxes 9 and 10.
On 19 July, HMRC updated their SA108 guidance notes to highlight an exception where the gain reported qualifies for Business Asset Disposal Relief (BADR – formerly Entrepreneurs’ Relief). This might apply for example on the disposal of a qualifying furnished holiday let. In these cases, HMRC advises for box 9:
“Where this applies the gain should be included in the box 17 total and not in box 9. Also include the amount of the gain that you reported on your Capital Gains Tax UK Property Disposal return in box 21, not in box 9. If part of the gain does not qualify for Business Asset Disposal Relief, then enter that non- qualifying part of the gain in box 9 (and the box 6 total) and the qualifying part in box 21 (and the box 17 total)”
Similarly, for box 10, the previous guidance now has the following exception:
“An exception to this rule applies if all of a gain that you reported on your Capital Gains Tax UK Property Disposal return qualifies for Business Asset Disposal Relief and no other gain or loss is otherwise required to be reported in box 9. Where this applies the tax charged on the Capital Gains Tax UK Property Disposal return should be included in the box 22 total, not in box 10.”
Whether or not the property service will request additional supporting evidence such as calculations, sales documentation etc depends on the route taken. If the system calculator gives an answer that the taxpayer agrees with, more information will not be required but the option to supply it is given. If the taxpayer does not agree with HMRC’s calculation, then they will be asked to supply supporting evidence such as a calculation/computation but any further evidence is optional.
In contrast, the paper return requests evidence such as ‘calculations, invoices, receipts or valuations’ in all cases.
While we consider it reasonable to request a computation when the figures differ from HMRC’s, we suggested to HMRC that to supply copies of other documents (particularly for every paper return as suggested) seemed excessive.
HMRC have confirmed to us that there is no definitive list for what the user should supply and users should attach whatever they would have supplied to accompany a CGT disposal on a self-assessment tax return. Members should use their judgement therefore as to what further information to supply.
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.
A thread on the Agent Forum (ref CGT-11160) highlighted an issue which arose in early April where the system was giving an incorrect calculation for a 2021/22 disposals if the individual had used the system to make a report of a disposal in 2020/21. HMRC advise this issue was fixed on 6 May 2021 and the system should now be operating as expected for 2021/22 reports.
We continue to work with HMRC to highlight areas where we consider that there are gaps in the guidance so we can update this note. Feedback and comments from members atttechnical [at] att.org.uk (are always welcome), particularly those which highlight any concerns or gaps to feedback to HMRC or if which identify any errors in this note.