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Where Taxpayers and Advisers Meet

NRCGT return

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm
Re: NRCGT return

Postby etf » Mon May 24, 2021 9:53 am

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.

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Mon May 24, 2021 10:14 am

Regarding the lack of awareness issue, would it be too much to ask estate agents/legal advisers to be obliged to give a leaflet to all sellers advising them of the potential 30 day CGT return filing obligation with a link to a flowchart to help sellers establish whether a 30 day tax return is required?

I'm sure the number of late filers is actually much higher than the one third fraction quoted as some sellers will still be unaware of their filing obligation.

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Thu May 27, 2021 9:30 am

Well it appears the HMRC individual responsible for publicising the introduction of 30 day NRCGT return filings back in 2015 has finally received a promotion to the position responsible for notifying the public of local lockdowns in England. Matt Hancock and Boris were said to like this individual's working practice of posting a few lines on an obscure website and leaving the public to find it amongst the millions of on-line pages covered by google (other search engines are also available). Just think of the millions of pounds of late filing penalties this behaviour helped to raise.

Regular readers of this thread may recall that after providing quarterly information on NRCGT late filing appeals up until March 2020 through FOI requests, HMRC suddenly decided they were no longer willing to provide that information (perhaps an attempt to bury bad news until well after the event....a 5 year old could establish that it is highly likely that a Department that states it treats taxpayers fairly but has a successful NRCGT appeal rate that fluctuated from 3% success to 97% success has some serious questions to answer).

Anyway, HMRC appear to have been willing to provide some information (see below) to a supposedly independent body whilst refusing requests from others....life just isn't fair.

Chart 1.A shows HMRC management information on the number of UK
Property tax returns filed in the nine month period from 6 April 2020, when
the requirement was introduced, to 6 January 2021. The total number of
returns filed was 51,300.
D.8 Of the returns filed, 34,500 (approximately two thirds) were filed within 30
days. These are represented by the colour blue in the chart. The colour
orange represents the 16,800 returns that were filed late, meaning after 30
days.
D.9 It should also be noted that the total of 51,300 is a total of the returns that
were filed, as in received by HMRC, in the period. The total of returns due
was unknown at the time of preparing this report and could not be
estimated reliably due to changes in the property market resulting from the
COVID-19 pandemic. It is, however, virtually certain that some returns that
were due to have been filed by 6 January 2021 were not filed, either because
they were late or because of a failure to file.
D.10 HMRC have announced plans to publish statistics on disposals of residential
property where CGT is due within 30 days of completing the disposal. These
statistics are intended for release in August 2021.

someone
Posts:544
Joined:Mon Feb 13, 2017 10:09 am

Re: NRCGT return

Postby someone » Thu May 27, 2021 9:53 am

https://www.accountingweb.co.uk/any-answers/residential-property-capital-gains-over-paid

Looks like the residents 30 day CGT regime could be collapsing under its own weight too.

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Thu May 27, 2021 10:12 am

Thanks for posting someone.

You do feel the best solution might be to blow up our tax code and start again with something far simpler. Having to make multiple filings to settle one tax year (god MTD still to come...hoping I win the lottery before that comes in) just complicates things further.

I fielded a question regarding these 30 day returns yesterday which perhaps I can raise here. Some taxpayers are unable to file their self-assessment tax returns electronically because of their occupation. Does this also apply to these 30 day CGT returns and if so are there any paper return filing instructions on HMRC's website?

someone
Posts:544
Joined:Mon Feb 13, 2017 10:09 am

Re: NRCGT return

Postby someone » Thu May 27, 2021 10:19 am

If you google for questions where people have made two (or more) disposals in a single year I think you'll find references on how to get a paper form to file. (I understand that it's currently impossible to file a second disposal electronically)

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Thu May 27, 2021 10:42 am

Thanks someone.

I put a call into HMRC so will double check the following applies.

What if my client is unable to complete the digital handshake?
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.

In the early months of the system 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.

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.


etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Thu May 27, 2021 12:41 pm

I received my promised call back from HMRC.

The lady was unaware of any specific exclusion on these individuals filing their 30 day CGT returns electronically. I made the point about the self-assessment electronic filing ban rule and she advised me that the CGT reporting uses a separate system.

She suggested if the individual was concerned, they could file electronically using an option where they say they have no NI number/UTR number, or alternatively, request a paper return.

I think it would be helpful if HMRC included some instructions in their guidance because it all felt a bit like we were concocting something on the hoof.

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Thu Jun 17, 2021 7:02 am

I'll publish a fuller summary next week, but for the quarter ended 31 December 2020, HMRC accepted 99% of late filing penalty appeals for 30 day CGT returns. For the quarter ended 31 March 2021 they accepted 98% of appeals.

In earlier quarters that successful appeal figure has been as low as 3%. Once again I suggest HMRC are not treating some of their customers fairly and a thorough investigation needs to be undertaken.Hopefully a professional body will take note of these figures and put pressure on HMRC (as Taxationweb editorial staff appear to have given up).

Over 20,000 of processed returns were late filings in this 6 month period.

etf
Posts:840
Joined:Mon Nov 02, 2009 5:25 pm

Re: NRCGT return

Postby etf » Thu Jun 17, 2021 8:33 am

As part of my FOI request I asked HMRC to provide the number of 30 day CGT returns that had been filed in each quarter. This was their response to my request:

Section 22(1) applies if three conditions are met:
a) there was an intention to publish at the time the request was received; and
a) it is reasonable to withhold the information until the planned publication date and
b) it is not in the public interest to disclose the information earlier.
In considering (b) and (c) above we have taken account of the following factors.
We accept it is reasonable and in the public interest that information regarding disposals of

CGT liable residential property under the new rules effective from 6 April 2020 is made pub-
licly available. But the public interest will be met by our planned national statistics release.

Taking these factors in to account, we consider that, on balance, the public interest in with-
holding the information within scope of your request until after the national statistic are pub-
lished in August 2021,
outweighs the public interest in disclosure at this time


The above is absolute balderdash because if that "secret squirrel" mentality was observed consistently, how was I able to publish the following a week or two ago?

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.

Does this not prove the only reason HMRC denied my last and earlier FOI requests is because this thread and the highlighting of HMRC's unfair treatment of taxpayers is an embarrassment for the department. It reminds me of the "Don't tell them Pike" scene in Dad's Army.


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