HMRC has begun writing to individuals who have recently sold a second home to remind them to file a property disposal return and pay capital gains tax (CGT) within 60 days of completion. HMRC will identify candidate receipts by using unspecified ‘real time information’.
This follows recent confirmation from HMRC that a CGT property return must be submitted on the sale of a second home, even if a Self Assessment (SA) tax return has already declared the gain. In these situations, the CGT property return must be submitted using a paper return rather than via the online UK property account.
The only exception is where the SA return is filed within 60 days of completion of the transaction, meaning the SA tax return is filed before the due date for the CGT UK property return. In this case, the CGT UK property return is not required. For example, if a property is disposed of on 25 March 2022, the gain was reported on the 5 April 2022 SA tax return, and it was submitted by 24 May 2022 (60 days from the 25 March 2022), then a CGT property return would not be required. Therefore, this exception is only going to apply in a limited number of cases.
Taxpayers will be required to contact HMRC to obtain a paper return, which could result in missing the deadline. HMRC recently confirmed that 25,300 CGT UK property returns were submitted after the deadline in 2020/21 tax year, with a further 23,600 in the 2021/22 tax year.
We will most likely begin to see a decline in the number of returns submitted late following the extension of the deadline from 30 days to 60 days for transactions completing after 27 October 2021. According to recent figures, 2,000 returns were submitted late in the quarter to 31 March 2022, compared to 7,4000 the year before.
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The latest clarification by HMRC and the requirement to request a paper tax return could lead to further penalty pain for taxpayers. If you would like to discuss the new CGT reporting system in more detail or need help submitting a UK property return, avoiding costly penalties, get in touch with Jonathan Cunningham by clicking the button below.