Accountants highlight CGT reporting problems

A ‘very small number’ of taxpayers are to receive refunds of late filing penalties in relation to capital gains tax payable on disposal of residential properties.
These penalties were incorrectly issued, the Institute of Chartered Accountants in England and Wales has reported.

‘This error has now been corrected and the penalties cancelled. HMRC will be writing to all affected taxpayers to notify them of this error and reassure them that the incorrect penalty has been cancelled. Where the penalty has already been paid, HMRC is arranging refunds’, said the professional body.

The information came in a note on reporting of capital gains tax on disposals of UK residential property, something which ICAEW said had been beset by problems since its introduction in April 2020.

A major problem has been that many of those affected (CGT applies to sales of residential properties that are not the owner’s main home, so, for example, buy-to-let properties and second homes) do not have access to HMRC’s digital service. The result has been that significant numbers of CGT returns are being filed on paper.

‘Discussions with HMRC continue but improvements are unlikely in the foreseeable future. As of the beginning of December 2021, HMRC was processing paper returns from October 2021, although a small number of older cases with amendments or additional returns are outstanding for longer. ‘Where a paper return is filed payment is due 30 days from the date of the HMRC demand (this has been increased from 15 days).

The ‘long-awaited’ detailed HMRC guidance on CGT on disposals of UK residential property has been published as an appendix to the CGT manual, said ICAEW.

However, the service has not yet been updated to reflect a change announced with the 2021 Autumn Budget that extended the deadline for reporting and payment of CGT on residential disposals from 30 days to 60 days. ‘ICAEW understands this work is in hand but is not aware of the timing for implementation’.