Call on govt to extend CGT deadline to limit fines

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.

As we have often said over the last 18 months, we remain convinced that many of the problems associated with this reporting change would be solved by simply doubling the reporting period from 30 days to 60 days.AAT

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.

"We continue to communicate with customers and stakeholders about the policy.”

In its Budget submission, AAT argued the likes of estate agents and solicitors should also be advising clients on the 30-day requirement change but added a change to 60 days would suffice to sort many clients' woes. 

“As we have often said over the last 18 months, we remain convinced that many of the problems associated with this reporting change would be solved by simply doubling the reporting period from 30 days to 60 days. 

“This would still secure increased revenue compared to the previous reporting requirement but doubling the period to 60 days would better reflect the need to reduce frequently encountered challenges for agents and their clients and especially for those who are unrepresented.”

Other bodies had also called for this change earlier this year. The Office of Tax Simplification published a report in May 2021, in which it warned many taxpayers only find out about their obligations after they have sold their property.

But even with adequate awareness and preparation the OTS considered 30 days was still a challenging deadline.

"The government should consider extending the reporting and payment deadline for the UK Property tax return to 60 days, or mandate estate agents or conveyancers to distribute HMRC provided information to clients about these requirements," it stated. 

In the submission, AAT included quotes from its members. One such was from Ann White director of Abacus Accountancy and Payroll Services, who said she understood why HMRC wanted to get money into the coffers earlier, but thought it had not given this "enough thought".

“I took on a client this year, an elderly couple in their late 70s. They sold a property that they’d inherited and had been renting out. Nobody told them of this requirement, and they ended up with a letter from HMRC and were in a total panic. The information just isn’t out there.” 

Mark Harwood, managing director at Michael Harwood & Co Chartered Accountants, added: “The 30-day deadline is very tight when you’re dealing with the sale of a property, which can drag on, only to find out that you’ve got to register, calculate the tax, pay the tax, etc. within 30 days."

ruby.hinchliffe@ft.com