TaxationWeb covers some of the main issues affecting taxpayers and 31 July 2020 deadlines.
Tax Credits Renewals - Check and in Some Cases Renew
HMRC has automatically renewed more claims than usual because of the SARS-CoV-2 pandemic but it is stil recommended that the awards sent out be checked carefully, in case HMRC's information and assumptions about income are wrong for last year and/or for the coming year (in which case the Tax Credits awards may well also be wrong). Apparently, as many as a million or more renewals were sent out with information missing - athough HMRC is confident that the Tax Credits awards themselves will stlil be based on complete information.
There will still be a good number of Tax Credits renewals packs where the claimant(s) will need to provide more complete details, such as where they are self-employed - a reply is required from the claimant(s) in order to prevent the Tax Credits award being paused, treated as lapsed and potentially as having been overpaid.
The Low Incomes Tax Reform Group (LITRG) has really good information for claimants on the Tax Credits regime, how to claim and what to do if there are difficulties in renewing the claim in time
Self Assesment 2019/20 Second Payment on Account
Under Self Assessment, the second Payment on Account for the tax year normally falls due on 31 July. Most readers will be aware that the Chancellor announced on 20 March 2020 that taxpayers could postpone their second Payment on Account for 2020/21 by 6 months until 31 January without suffering any interest or penalties (so long as it is actually paid in ful by then).
HMRC has since issued Statements of Account changing the usual payment date from 31 July 2020 to 31 January 2021. Otherwise, their systems would have automatically charged interest and potentailly penalties for anyone who paid late.
However, HMRC's guidance is that taxpayers should use this service only if they are finding it difficult to make their second payment on account by 31 July 2020 due to the effects of the SARS-CoV-2 pandemic.
Advisers in particular should note that the professional bodies have warned the condition should not be ignored, even if HMRC is effectively assuming that most Self Assessing taxpayers will be affected and therefore be eligible, automatically.
New Capital Gains Tax Regime for Disposal of UK Residential Properties
HMRC has introduced a new regime when UK residents dispose of UK residential property on or after 6 April 2020. The vendor has to notify HMRC and make a payment on account of the estimated CGT liablity within 30 days of completion.
It is all but certain that this new regime is going to catch out a lot of innocent taxpayers -- not least those who wrongly assume that it will get picked up in their tax return as usual - you still need to notify and pay HMRC within 30 days of completing a sale, even if you will include all the same information on your tax return later on. (There are some exemptions such as if the property sold has always been your main residence, so is "exempt" from CGT, or a loss has been made).
There is also the fact that many taxpayers will wrongly assume that a gift of property does not need to be reported. Aside from transfers between spouses / civil partners who are living together as a couple, most gifts not involving one's main home are chargeable to Capital Gains Tax and will need to be reported under the new regime.
HMRC has magnanimously allowed a brief reprieve from penalties - a "soft landing period" - but that expires on 31 July 2020. Any disposal reports for property sales completed from 6 April 2020 to 1 July 2020 - which would be due no later than 31 July 2020 - will be exposed to penalties from 1 August onwards.(The usual 30-day window will apply for disposals completed 2 July onwards).
Below are extracts from correspondence from TaxationWeb to which HMRC replied on 17 June, which may be of use to some taxpayers and their advisers:
The following discussion thread on our forum:
highlights a number of issues with your new ‘facility’ for reporting / paying CGT on account for the disposal of UK residential property. (See for example https://www.tax.service.gov.uk/capital-gains-tax-uk-property/start/report-pay-capital-gains-tax-uk-property for background)
Can you please confirm:
- There is no facility for agents to make reports on behalf of taxpayers – are there any plans to address this?
- HMRC Reply:
- Agents are able to make reports on behalf of their clients via Agent Services. Once authorisation is held the agent will be able to submit a return via the microservice in the same way that their client would be able to.
- In the start page there is a section which provides a link to what to do if you are an agent [link to agent guidance: Managing Your Clien'ts Capital Gains Tax on UK Property Account]
- There is no online facility for taxpayers to report a subsequent disposal in a tax year so that a paper form is currently required for the second / subsequent disposal
- HMRC Reply:
- If a subsequent disposal is made, taxpayers currently must submit a paper form but the microservice will be further enhanced over the coming months to include the facility to report the disposal of a subsequent return.
- How the paper form might be accessed – does it yet exist?
- HMRC Reply:
- The paper form is available by contacting the HMRC Helpline where a personalised form will be issued.
- Where taxpayers cannot access the Government Gateway, what facility there is to report / pay CGT on account – can they use the aforementioned paper form instead?
- HMRC Reply:
- Although the majority of our customers should be able to register for a Government Gateway account, those customers who have a National Insurance number but do not possess the required information to go through identity verification can request a paper form.
- Customers who do not have a previous footprint with HMRC (no National Insurance number), are able to register for the CGT service by creating sign in details.
- There is a link on the start page which links to contact numbers if customers need help. [You can contact HMRC if you need help accessing the service.]
- We keep all our guidance and information for customers under review and welcome feedback to improve our services.
- Outside of notifying the professional bodies, have you yet put anything in the public domain which confirms HMRC’s ‘soft landing’ for reporting in the first couple of months of the regime?
- HMRC Reply:
- HMRC has publicised the change through an information pack estate agents, agent bodies, and conveyancing solicitors covering CGT.
- We have also published a news story on the change and release a press notice to media.
- Communications on the change are continuing over the coming weeks.
Regular readers will be aware of HMRC’s approach to publicising the NRCGT returns and the many thousands of penalties which arose thereunder. These NRCGT returns are basically the same thing but introduced a couple of years ago (2015) for non-residents. It has been causing huge problems ever since.
and one of our most popular forum threads over the last several years:
Given that the new “report and pay” regime is effectively ‘onshoring’ the old NRCGT regime now for UK residents, that there has again been precious little publicity for the new regime and that it has the scope to affect many, many more disposals than did NRCGT, From an adviser's perspective, I suggest that a ‘soft landing’ period of just 2 months is woefully inadequate if, as HMRC has said on numerous occasions in the past, it would rather receive returns than issue penalties. 12 months would be better, particularly in light of the less-than-ideal start to the regime.