Everfair Tax have seen an influx of new clients, who whilst living abroad were unaware of the requirement to report and pay Capital Gains Tax on UK property sales within 30 days. The concerned clients had been issued with late penalty notices by HMRC which Everfair Tax then successfully appealed.
The ongoing problem of oversees landlords being unaware of their UK tax obligations has been noted by HMRC, with many of the late payment notices being overturned at tribunal, due to the insufficient publicity of the reporting requirements.
Now with the requirement to report and pay Capital Gains Tax within 30 days of disposal being extended to cover property sales for UK residents in April 2020, they are keen to minimize the problem occurring for a second time and are taking steps to ensure that the information is widely circulated.
So, HMRC have announced that UK taxpayers are to be given special notification of the new rules and requirements before they come into effect, and has conducted some research to investigate how best to inform them.
This has shown that taxpayers required to pay CGT due to selling a one-off rental property, or an inheritance property were least likely to know of the changes. A large proportion of these individuals did not utilize an agent for tax guidance and many that did, only used their services occasionally or for a specific query based on their individual tax circumstances.
The HMRC website was also seen to be confusing, with some understanding that the term ‘payment on account has to be made in 30 days’ believing that this was a part payment, rather than payment in full. Here, the taxpayer is required to calculate his CGT liability and make the payment, with HMRC checking the numbers later, before issuing a correction if necessary.
Solicitors and accountants informed HMRC that they do advise clients about the CGT payment deadlines, but one –off disposal taxpayers were often still unclear and had therefore missed the deadlines. Once again the clarity of the HMRC’s website came into question here, as navigation around the site is complicated and the intricacy of CGT means key information such as deadlines can be missed.
In addition, solicitors had found that taxpayers without representation had often omitted to pay CGT on previous property disposals, and were now facing potential penalties for the late payments.
With large numbers of holiday home owners and small-scale landlords being both unaware of and affected by the new rules, respondents to the research advised HMRC that notification on the policy change should be conveyed as soon as possible.
For those considering the sale of a second home, rental or inheritance property, disposal before April 2020 would remove the need for any confusion and payment of CGT within 30 days. Currently, a sale does not have to be reported, or CGT paid until the self-assessment form deadlines, some of which may be up to 22 months after the property disposal, and the new rules only apply to disposals after April 2020.