Business Services, Business Tax, Personal tax

Complexity of filing paper-based CGT returns for property

By RJP LLP

Complexity of filing paper-based CGT returns for property

Rules are now in place requiring taxpayers to file and pay CGT due on residential property sales within 30 days of completion. There are some discrepancies with the system – people who are filing on paper need a payment reference from HMRC before they can make a payment but people who are filing online can pay immediately, via the UK property service. This means those who are filing on paper could be disadvantaged, because of the way HMRC co-ordinates the processing time.

When taxpayers are waiting for their reference number, HMRC ‘stops the clock’ as soon as the paper form is received, so that any delays with processing do not count towards the 30-day window. This would be acceptable, but HMRC was then issuing paper filers with a fixed time period of 14 days to pay from the date of the demand issued by HMRC rather than resetting the time period again after processing.

This set 14-day period was problematic for taxpayers because of the time it takes for post from HMRC to arrive. It can take up to 10 days and then a cheque must be returned, which was resulting in many people missing the deadline. As a result, HMRC have extended the deadline so that paper filers can now pay within 30 days of a demand arriving, but the delays continue. This can make it hard for taxpayers to plan ahead.

When self-assessment interacts with CGT reporting

Where the situation can become more challenging is when CGT needs to be paid in-year and a refund is later due. This creates unacceptable delays if an amendment needs to be done via the self-assessment forms. Funds then need to be transferred by HMRC before an overpayment can be returned or offset against other self-assessment liabilities. This situation only arises when paper returns are submitted – when the adjustments are made online, refunds are automatic.

The ATT have expressed concerns for taxpayers submitting 2020-21 self-assessment tax returns because delays processing paper CGT returns could cause problems if the taxpayer is ready to file their self-assessment return, but still waiting to pay on a paper return. Anyone whose expected refund is greater than their self-assessment liabilities, is justifiably unlikely to want to overpay.

More guidance about this situation is needed from HMRC, but in the meantime, it is worth being aware of the potential complications arising of paper filing, and file online wherever possible.

If you’re looking for more advice on CGT planning then check out the linked article about the best approaches under the Labour government elected in 2024.

If you are selling a property that will be subject to CGT on gains and require advice, please contact partners@rjp.co.uk.

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