This was all predicted before HMRC introduced these filings....30 day CGT reporting is to HMRC what Bashir is to the BBC....hopefully someone will grill the HMRC decision makers but I'm not holding my breath. If the tax community were football supporters we would already have a European Super League....whatever you say Real Madrid.
Sometimes, a conversation takes an unexpected turn. That was exactly what happened when I joined Rebecca Benneyworth for an AccountingWEB Tax Talk recently.
Becky and I like to treat these sessions as unscripted conversations. We keep an eye on the comments from participants and one in particular sparked interest – the UK property tax return for disposals of UK residential property. Two concerns predominated: the 30-day reporting limit and the level of awareness.
Obligations and awareness
John Stokdyk also picked up on the awareness problem recently. For any tax obligation to be perceived as fair, there must be a reasonable expectation that those affected will be aware of it.
Someone with a tax adviser would naturally expect their adviser to alert them, but in the case of the UK property tax return this can only happen if the adviser is aware that a disposal is planned; if the adviser is only told when preparing the self assessment tax return sometime later, penalties and interest will already have accrued.
For those taxpayers who do realise that there is an obligation, 30 days may prove challenging to set up an online account (after obtaining a government gateway ID if they do not already have one), assemble the information necessary to calculate the gain, perform – or authorise an agent to perform – the calculation and file the return.
In some cases, the information will be readily to hand; in others, some or all of it will have to be searched for.
Both of these points were made during the Tax Talk session and several ideas were floated. The most radical was to require the solicitor dealing with the transaction to withhold funds from the sale proceeds and pay this across to HMRC.
A less controversial suggestion – which was also flagged in John’s piece - was that it should be incumbent on the conveyancing solicitor or the selling agent to alert the taxpayer to the need to make a return and to point them to the appropriate guidance.
Simplification
These two issues were considered by the Office of Tax Simplification (OTS) in its latest report on capital gains tax. The report notes that between 6 April 2020 (when the reporting requirement commenced) and 6 January 2021, more than 50,000 UK property tax returns were filed, one third of them outside the 30-day time limit.
It is too early to know whether there were taxpayers who should have completed a return but who did not do so. A one-third compliance failure rate must be a concern.
The OTS suggests extending the reporting period from 30 to 60 days or, alternatively, raising awareness of the obligation by requiring estate agents or conveyancers to pass HMRC-provided information to taxpayers when a residential property is placed on the market or instructions given to a conveyancer. These recommendations echo the suggestions made by AWeb members during the Tax Talk session.
Some respondents to the OTS call for evidence suggested that property professionals could play a greater role in calculating any tax owing and handing it over directly to HMRC, much as they are expected to do with stamp duty land tax.
The OTS does not, however, consider this a realistic option as these professionals are not tax specialists. As well as addressing the timing and awareness issues, the OTS also recommends integrating the UK property tax return into the digital Single Customer Account. Adopting these recommendations would make a real, practical difference to those affected and would assist in improving compliance.
Integration and convergence
Personally, I would encourage HMRC to go further.
HMRC’s stated aim – of which I am 100% supportive – is to create one of the world’s most advanced digital tax systems. Integration must be at the heart of that ambition.
The UK property tax return is a stand-alone. Even if the taxpayer has an authorised agent, a further authorisation is required for the return. My understanding is that it does not link directly to the self assessment system. The optional real-time reporting service for capital gains is also free standing.
I’d like to see some questions embedded in all new digital design proposals:
Will it be possible to launch with the functionality taxpayers need?
Will it integrate fully with the relevant existing HMRC systems (such as self-assessment or single customer account)?
Will it make use of existing taxpayer identifiers?
Will it give authorised agents the access they need?
Will it duplicate an existing reporting requirement?
These questions would encourage convergent, rather than parallel or even divergent developments. The result would be better for HMRC, taxpayers and agents. A digital win/win.
- Home
-
Tax News
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice and Methods
- Professionals in Practice & Industry
- General
- TaxationWeb
-
Tax Articles
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings and Investments, Pensions and Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice & Methods
- Professionals in Practice & Industry
- General
- Tax Tips
-
Tax Forum
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations and Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practices & Methods
- Professionals in Practice & Industry
- General
- Tax Jobs
- Get in Touch