CGT headaches – HMRC provides some answers on its UK Property Reporting Service
By Susan Cattell, Head of Tax Technical Policy
23 July 2021
HMRC‘s UK Property Reporting service has caused problems from its introduction, with the latest issue being offsetting overpayments against Self Assessment liabilities: HMRC has issued guidance on offsetting and produced a Q&A document to deal with other issues raised by ICAS and other professional bodies.
HMRC’s UK Property Reporting service
Gains on disposals of residential property in the UK on or after 6 April 2020 must be reported to HMRC and the tax paid within 30 days of the disposal. The 30-day reporting requirement was new for UK residents - non-residents already had experience of 30-day reporting with Non-Resident CGT.
HMRC introduced the online UK property reporting service for anyone (resident or non-resident) to use to report residential property disposals made from 6 April 2020 (and to pay the CGT).
The service has been problematic from the outset. ICAS and other professional bodies have been raising issues experienced by members with HMRC through the Issues Overview Group (IOG). At a meeting of the group in June, the latest issue (offsetting of CGT overpaid through the UK Property Reporting service) was discussed in detail, alongside a list of questions about other aspects of the service.
CGT overpayments – repayments and offsetting
This article does not cover the detailed rules for filing (and amending) 30-day returns or calculating the CGT to be paid at the time of filing. However, it was always likely that overpayments of CGT would arise as a consequence of 30-day reporting. At the time of residential property disposals (particularly early in the tax year), the final income for the tax year is often not known so an accurate calculation of the CGT liability may not be possible. Additionally, capital losses arising after the property disposal cannot be taken into account in calculating the payment to be made with the 30-day return.
Where it is possible to amend the UK Property Reporting return later in the year, a repayment of CGT can be claimed via the service. However, amended UK Property returns are not permitted in all circumstances – the detailed rules need to be checked. Amended returns also cannot be made after the Self Assessment tax return has been filed.
Agents undoubtedly expected that at the end of the tax year, it would be simple either to reclaim the overpaid CGT or offset it against liabilities shown in the Self Assessment tax return. However, this has proved not to be the case – the UK CGT property reporting service is not integrated with the self assessment system.
Following the June IOG meeting, HMRC has now provided details to the professional bodies, setting out how taxpayers and agents can either claim a repayment of any CGT overpaid via the UK Property Reporting service, or offset it against liabilities shown in the Self Assessment return.
The offsetting process is far from satisfactory for taxpayers or agents (or HMRC), as it requires additional contact with HMRC and manual intervention. HMRC are exploring a longer-term solution to the issue. They will also be updating the online guidance on the UK Property reporting service in due course – so that should be checked for any changes to the process in future.
Other issues with the UK CGT Reporting Service
ICAS Members have reported a range of other issues with the UK CGT Reporting Service, including difficulties with the digital handshake required to authorise an agent, inability to file online returns for estates, and problems obtaining payment references where paper returns have had to be filed. The digital handshake is the subject of wider discussions with HMRC - but alongside the guidance on offsetting, HMRC has also provided a Q&A document for professional bodies to share with their members. This provides answers (or explanations) for many of the widely reported issues.
Again, HMRC will be updating their UK Property Reporting service online guidance in due course, so this should be checked for any future changes.
Tell us about your experiences of dealing with HMRC
We welcome feedback from Members, about their experiences dealing with HMRC. We participate in various HMRC stakeholder groups (including the Issues Overview Group and the Charter Stakeholder Group) which provide opportunities to give feedback to HMRC and raise issues.
Please send us your input by emailing tax@icas.com.