The Association of Accounting Technicians has written to chancellor Rishi Sunak asking him to extend the capital gains tax reporting deadline for house sales, amid concerns more people are facing hefty fines from HMRC.
In its Budget submission, submitted last week, the accounting body criticised the “unreasonable” nature of a period as short as 30 days to pay CGT following a residential property sale, highlighting a “lack of awareness” of the timeline amongst those affected.
It called for the period to be doubled to 60 days to give house sellers a chance to pay the tax before incurring a fine.
CGT is paid on any annual gains over £12,300. In April 2020, the government changed the timeframe in which people can pay this tax from nearly two years to just 30 days. Previously, gains could be reported in a self-assessment tax return in the tax year after the property was sold.
AAT’s public affairs and policy head, Phill Hall, told FTAdviser: “Estate agents aren’t advising customers this is something they will have to do, so they’re only going to find out when they do their tax return.
“If they [sold] in April, the fine is looming over them for an entire year without them realising until their next tax return. It’s a particularly unpleasant situation if a customer has already spent their gains.”
The fine for not paying CGT within 30 days of a residential property sale is £100, but after six months this jumps to 5 per cent of the gain. “This could potentially be an astronomical sum of money,” Hall pointed out.
The new deadline has netted the Exchequer an increased revenue of £935m over the tax year 2020-21.
But this was to the detriment of home sellers, who are increasingly facing fines from HMRC for missing the shortened deadline window, which Hall dubbed “practically impossible” not to miss.
“HMRC needs to improve its guidance for estate agents,” Hall explained. “Accountants can’t do it for their clients. There’s a specific online account you have to set up, which takes two weeks to do. There’s not enough time. You’re virtually never going to be able to do it in 30 days, it’s practically impossible.”
But Hall added people don’t have to wait until their house sale has gone through to set up the account. “It’s really about awareness of the change in requirements,” he concluded.
A spokesperson from HMRC told FTAdviser: “We raise awareness of CGT reporting rules through a range of communications including webinars, social media posts, stakeholder forums, newsletters and post-Budget updates.
"To raise awareness of the payment window for property disposals we have communicated to customers and stakeholders, reached out to industry press, engaged agents, hosted webinars for landlords and shared information on Twitter and LinkedIn.