Selling a rental property or second home? HMRC provides some answers on its UK Property Reporting Service
HMRC’s UK Property Reporting service is used to report gains on disposals of UK residential property to HMRC. It has suffered from problems since its introduction – HMRC has recently issued guidance to address issues raised by ICAS and other professional bodies.
HMRC’s UK Property Reporting service
Gains on disposals of residential property in the UK on or after 6 April 2020 must be reported to HMRC and the Capital Gains Tax (CGT) paid within 30 days of the disposal. The 30-day reporting requirement was new for UK residents – non-residents already had experience of 30-day reporting with Non-Resident CGT.
HMRC introduced the online UK property reporting service for anyone (resident or non-resident) to use to report residential property disposals made from 6 April 2020 (and to pay the CGT). Non-residents must report disposals even if no tax is due.
The service has been dogged by problems – the latest issue being the offsetting of CGT overpaid through the UK Property Reporting service against self assessment liabilities. In response to queries from ICAS and other professional bodies, HMRC has recently issued guidance on offsetting and provided answers to a list of other questions raised.
CGT overpayments – repayments and offsetting
This article does not cover details of the complex UK tax regime relating to CGT and property – or the detailed rules for filing (and amending) 30-day returns or calculating the CGT to be paid at the time of filing. However, it was always likely that overpayments of CGT would arise as a consequence of 30-day reporting. At the time of residential property disposals (particularly early in the tax year), the final income for the tax year is often not known so an accurate calculation of the CGT liability may not be possible. Additionally, capital losses arising after the property disposal cannot be taken into account in calculating the payment to be made with the 30-day return.
Where it is possible to amend the UK Property Reporting return later in the year, a repayment of CGT can be claimed via the service. However, amended UK Property returns are not permitted in all circumstances – the detailed rules need to be checked. Amended returns also cannot be made after the Self Assessment tax return has been filed.
It was expected that at the end of the tax year, it would be simple either to reclaim the overpaid CGT or offset it against liabilities shown in the Self Assessment tax return. However, this has proved not to be the case – the UK CGT property reporting service is not integrated with the self assessment system.
HMRC has provided details to ICAS and other professional bodies, setting out how taxpayers and agents can either claim a repayment of any CGT overpaid via the UK Property Reporting service, or offset it against liabilities shown in the Self Assessment return.
The offsetting process is far from satisfactory for taxpayers or agents (or HMRC), as it requires additional contact with HMRC and manual intervention. HMRC is exploring a longer-term solution to the issue. HMRC will also be updating the online guidance on the UK Property reporting service in due course so that should be checked for any changes to the process in future.
Other issues with the UK CGT Reporting Service
There have been numerous other issues with the UK CGT Reporting Service; alongside the guidance on offsetting, HMRC has also provided a Q&A document which provides answers (or explanations) for many of the widely reported issues.
Again, HMRC will be updating its UK Property Reporting service online guidance in due course, so this should be checked for any future changes.
The content of this article is for general guidance only and is not intended to be definitive or to give guidance on specific circumstances. It is not a substitute for taking advice and should not be relied upon.