CGT online tool
April 30, 2018
HMRC has introduced an online system for individuals to report capital gains tax (CGT) and pay any CGT due.
HMRC launched the online CGT service HMRC online capital gains tax tool very quietly in October 2016, as an add-on to the online personal tax account
It is designed to allow taxpayers to report capital gains and losses close to the transaction date, and pay the tax they owe straight away rather than wait until the due date of 31 January. Interesting why we might consider paying HMRC early …..
The benefit of using the online CGT service, implied by HMRC, is that the taxpayer doesn’t have to report the gain, and all their other income, on a full self assessment tax return. Where an individual has made a one-off gain, perhaps on the sale of a buy-to-let property, that gain can be reported without bringing the taxpayer within the self assessment (SA) system. HMRC sees this a win, as it doesn’t want taxpayers in self assessment completing and submitting tax returns unnecessarily.
What is its legal status?
The formal SA tax return does give rights and obligations for both the taxpayer and HMRC in relation to penalties, investigations and the finality of the individual’s tax affairs -where does the online CGT service fit in relation to this?
The real time CGT service is not a tax return in law.
The online CGT service must be navigated without the help of an accountant.
Tax Agents are not permitted to access their clients’ online personal tax accounts, so they can’t complete a real time transaction return for capital gains tax for their clients.
There are no specific regulations governing when a real time transaction return must be submitted, or the associated issues of amendments, and investigations. The guidance on CGT page on gov.uk says: “You must report by 31 December after the tax year when you had the gains”, – a statement which has no legal standing.
The deadline for reporting capital gains and paying CGT is the 31 January after the tax year end, or three months after the date of a return/ notice issued after 31 October (TMA 1970, s 8(1D-1F)).
The deadline is not 31 December. There is a much shorter 30-day reporting deadline
for non-residents who dispose of residential property in the UK under the NRCGT rules, but that’s a separate system.
If the taxpayer has submitted a real time transaction return but is also required to complete a self assessment (SA) return for another reason, the gain or loss must also be reported on the SA return. The SA tax return should include the reference number for the real time transaction return already submitted and report the CGT already paid through the real time CGT system.
If the taxpayer is not already within self assessment, they are required to inform HMRC by 5 October after the tax year end that they have a tax liability to report, or losses to carry forward (TMA 1970, s 7(1)). This can be done by completing form SA1 online, by posting a completed paper SA1, or by calling the self assessment helpline on 0300 200 3310. When HMRC issues the taxpayer with an SA return or a notice to complete an SA return online, after 31 October following the tax year, the return must be submitted to HMRC within 3 months of its issue date.
Various tax faculties ( CIOT, ACCA, ICAS and ICAEW) have confirmed that there has been no consultation with the professional bodies about the real time transaction return. It has not been discussed as part of Making Tax Digital or personal tax account meetings, so it is unclear how the real time transaction return fits in and around the Self-Assessment system, or as part of Making Tax Digital.
Jason Piper, senior manager tax and business law with the Association of Chartered Certified Accountants commented: “We share concerns about the statutory basis for the current system. Without that fundamental legal basis for a coherent suite of tools to allow taxpayers and their advisers to engage with HMRC, we are going to see more ‘grey area’ cases end up at Tribunal, and that’s bad for taxpayers and the tax system.”