HMRC fails to communicate 30-day CGT payment window

Property sellers are confused about the introduction of a new 30-day payment deadline for settling capital gains tax (CGT) on second and inherited property sales, with complaints about the overly complex guidance and dearth of communications from HMRC. Sara White reports

The latest HMRC research into the level of awareness of the CGT changes on property sales has found that all types of property sellers are confused about the new rules, whether they are experienced property owners, such as buy-to-letters and holders of large property portfolios, or accidental second property owners, who may be selling an inherited property.

From April 2020, taxpayers will no longer be able pay any tax charges as part of the self-assessment cycle as this will be replaced by a 30-day payment window on CGT charges on sales of second properties.

All property sellers described the information provided by HMRC as ‘difficult to understand due to long paragraphs containing financial terminology and unfamiliar terms related to CGT. As a result, neither audience felt confident that they had fully understood the policy changes and felt they would need to refer to a professional for clarification’.

There was also criticism of HMRC’s policy change document, which respondents were asked to review, with the general consensus that it ‘was aimed at professionals because of the liberal use of financial terminology and references to tax legislation’.

HMRC rejected the criticism and told Accountancy Daily that guidance is ‘written in a clear and understandable way for customers’.

However, excessive use of jargon was another problem area for one-off property sellers, according to the research, with calls for more straightforward, less technical language. ‘Sections 12ZA to 12ZN- it's about jargon and confuses people. When you inherit a property you're less familiar with the rules, there should be something about bereavement and inheriting property,’ one respondent complained.

Typically, respondents said that although they could find the initial information on HMRC’s website, it was difficult to use or find quick answers to questions and the sheer volume of information on the subject made it difficult to understand.

‘After reading through content sequentially, some customers felt that the quantity of information included made navigation more difficult. This was especially the case for those looking for a very direct answer to their question who felt somewhat overwhelmed by the large amount of content to read through especially as information on disposal of other assets was also included,’ the report stated.

One user of HMRC’s website, who was considering selling a property in the next 12 months, said: ‘It's not bad, I mean the information is down below, so you have to scroll down but I'm going around in circles here. I just want a very simple answer to “how much capital gains tax would I pay on a property that's not my main residence?”’

This view was echoed by others – ‘it’s easy to understand but not easy to find the relevant information I want’. Another said the examples of CGT in practice were useful, ‘but they don’t give you enough of them’.

The research focused on one-off property owners selling off a recently inherited property, for example, who by default did not own second properties, and multiple disposal customers with larger property portfolios, particularly buy-to-let landlords.

Typically, taxpayers said that there had been a lack of communications from HMRC and ‘all believed the policy change should be communicated as soon as possible given that the property disposal process can sometimes be lengthy and could involve complex discussions around tax with intermediaries’.

Property selling is complex, involving estate agents and solicitors, neither of which group were in a position to offer detailed CGT advice, so most sellers were advised to deal with an accountant to calculate and file their liability ‘because they did not know enough about capital gains tax to be comfortable in calculating and filing what they owed’, the research stated.

However, by contrast, the research found that multiple property sellers were more likely to handle their own tax affairs, a fact which seems to contradict accepted practice. ‘“Multiple disposal” customers who were more confident in their CGT knowledge tended to act independently and only use intermediaries where added assurance was required.

‘Advice included knowledge on any reliefs or exemptions that customers might be eligible for which could reduce the liability owed or timing of CGT payments. These individuals drew their knowledge from previous experiences of selling properties and paying CGT. They were confident enough to calculate their liability themselves without assistance and would have their accountant informally review and verify their calculations. The most confident customers would file directly with HMRC entirely independent of specialist help.’

The report also highlighted issues for accountants where sellers were over-confident about their knowledge of CGT and often did not have the right information and documentary evidence. One accountant told researchers: ‘Not having the right information on values of assets from the past and having to find this information. That can sometimes be an issue,’ while one solicitor said that ‘we have customers not paying it because they are not aware of it. They then incur penalties and need advice on them’.

An HMRC spokesperson told Accountancy Daily: ‘We know it’s important to ensure we communicate changes to customers in a clear and timely way.

‘HMRC commissioned this research to gain valuable insight into how customers get information on capital gains tax, so we can effectively communicate the new 30-day payment window to customers. This will ensure that impacted customers know what they have to do in good time.’

HMRC has confirmed that it will be putting guidance on on the changes in due course.

The qualitative research was conducted by Ipsos MORI’s Social Research Institute.

HMRC report 542, Capital Gains Tax communications research

Report by Sara White

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