Accountant trade body ICAEW has flagged up two major problems with Capital Gains Tax (CGT) payments that could prove challenging for landlords disposing of properties.
The Institute of Chartered Accountants in England and Wales says the requirement to report and pay CGT on UK residential property within 30 days of completion has been poorly publicised and that new issues have surfaced.
Taxpayers are now having to complete paper returns to avoid incorrect tax calculations and, because they can’t offset overpaid CGT against an income tax liability, forcing them to pay twice and reclaim the CGT.
It explains that if a return has already been submitted for a disposal in 2020/21, and then a further return is made, an incorrect calculation is likely to be received.
HMRC has advised anyone affected to contact its CGT helpline and request a paper return. However, the trade body says: “HMRC has not provided a timeframe for fixing this issue but the fact that it is advising the completion of paper returns when there is already a processing backlog of several months suggests that the fix may not be made soon.”
It adds that as the first self-assessment tax returns are filed for 2020/21, HMRC systems are not allowing CGT payments already made to be offset against income tax.
For example, if the liability on a return is income tax of £20,000 and CGT of £40,000, the net amount due will be £10,000 but that HMRC has insisted £20,000 income tax is due, while the £10,000 CGT should be reclaimed by amending the original CGT UK residential property return.
The trade body says it has raised this issue with HMRC and that discussions are ongoing. “This is clearly extremely inefficient for HMRC, the taxpayer and the agent.”