Convoluted processes, an unrealistic deadline and a lack of communication leave much room for improvement.
The changes to reporting requirements for Capital Gains Tax (CGT) on residential properties came into force with little fanfare on 6 April 2020. It got lost in the messaging around controlling the COVID-19 pandemic, and more than a year later, people are still unaware that anything has changed – which is a problem.
Anyone selling residential property in the UK must report and pay any CGT due using a Capital Gains Tax on UK property account within 30 days of the sale. Failure to report in this time results in a penalty and interest on the amount owed.
To create a CGT on UK Property account, users need a Government Gateway user ID and password. Non-UK residents also have to report on sales of UK property within 30 days, even if there is no tax to pay.
For accountants to report on a client’s CGT on UK property, they need specific authorisation from their client.
- sign in to an agent services account
- select ‘ask a client to authorise you’ to manage their Capital Gains Tax on UK property account
- enter the client’s details to get a link to share with them and the date it expires.
- email the authorisation link
- the client will need their Government Gateway user ID and password to log in and create their Capital Gains Tax on UK property account.
Many accountants are worried about the reporting deadline and the lack of awareness about the change. AAT will be taking up their concerns with the Financial Secretary to the Treasury.
Get up to speed: AAT VAT update
Stay ahead of the VAT changes planned for 2021 and beyond through this in-depth AAT course. We’ll be covering input tax, international trading, common errors and considering the impact of Brexit.
Estate agents and solicitors should raise awareness
Mark Harwood (FMAAT), Managing Director, Michael Harwood & Co Chartered Accountants
We’re concerned about the lack of awareness of this change. More often than not, we’re seeing clients who have had property transactions and haven’t been made aware of this change in legislation, which came in right at the start of the very first lockdown. The 30-day deadline is very tight when you’re dealing with the sale of a property, which can drag on, only to find out that you’ve got to register, calculate the tax, pay the tax, etcetera within 30 days. It seems difficult to meet if you’re not aware of it. If you know about it before you do the transaction, it’s achievable, but to suddenly find out you should have done something is a problem.
HMRC wants to collect the tax earlier, which is understandable, but ultimately it’s not being publicised enough. Solicitors don’t want to comment on it because it’s a tax issue. A lot more could be done; estate agents and solicitors could do more to raise awareness of this more than anything else.
Next steps: We’re talking to AAT to get awareness back out to members, and I’m part of a group talking to HMRC about extending the deadline to 60 days, which I think is more workable. We’re also speaking to solicitors and estate agents to make sure they’re aware as well as our own clients.
Verdict: We need greater publicity of the change in order to make this work.
The process is long-winded – HMRC didn’t give this enough thought
Ann White (FMAAT), Director, Abacus Accountancy and Payroll Services
This is a really hot topic at the moment. Reporting CGT on a tax return at year-end always worked really well, but I can see that HMRC want to get money into the coffers earlier, which isn’t necessarily a problem. They just didn’t give this enough thought.
A deadline of 30 days isn’t very long between completing on a property and paying what the gain is assessed as. I’ve made any solicitors that I deal with aware that there is this requirement for 30-day reporting. The majority didn’t know about it.
I took on a client this year, an elderly couple in their late 70s. They sold a property that they’d inherited and had been renting out. Nobody told them of this requirement, and they ended up with a letter from HMRC and were in a total panic. I sorted it out for them, but they were a week late in paying and had to pay a fine. The information isn’t out there.
From a processing point of view, this is also not easy. If you’re an accountant with authorisation to deal with a self-assessment, you don’t have that authorisation to deal with this particular aspect of CGT. The taxpayer has to log in to their Government Gateway account, assuming they’ve actually got one and know how to log on. They then have to authorise the agent and give them a code. The agent then does a special return. It’s quite long-winded. It’s OK if you know what you’re doing, but there’s a lot of taxpayers who don’t know how to use it.
Next steps: Any clients with rental properties have been advised to speak to me if they’re considering a sale so that I can go through everything with them. You need to get all the documentation together from when they acquired the property, etcetera, and it’s better to be ready in advance of the sale.
Verdict: I think 30 days is an unrealistic timeframe. It would be better as 90 days, and HMRC should ensure that when accountants do the tax returns, that adjustments can be made.
Have you read AAT’s new ethics guidance?
All AAT members are bound by AAT’s Code of Professional Ethics, so have you seen the four new guidance notes?
Getting on the Government Gateway has proved to be an issue
Ali Jaw FMAAT, General Manager, Severn Accounting
One of the issues we’ve had with our clients was to get the Government Gateway running. In order to use the Gateway for CGT, the HRMC requires verification through an identity document issued by the UK government – a passport, driving licence etcetera. Non-UK residents, for example, won’t necessarily have that. In that case, they would have no choice but to fail to file. They now have a separate pathway for non-UK residents, which should solve the problem.
The 30-day period is also just too short, considering how much you need to do in that period. We’ve done a few now, so we’re starting to get the hang of it.
Next steps: We’ve been advising clients in the UK to plan ahead, and we’ve written a blog to raise awareness. We ask them to tell us their plans way in advance so we can give them a forecast based on the market value of the property and make sure they have all the relevant paperwork so when the sale goes through, we can file.
Verdict: I would like to see them change it so that if the client has a self-assessment date coming up, they don’t have to worry about the 30-day window. That would make more sense.
Annie Makoff is a freelance journalist and editor.