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Tax Compliance

The government extends the filing window for UK Property Reporting Service

The government extends the filing window for UK Property Reporting Service
Amal Shah

By Amal Shah

26 Jan 2022

Within the 2021 Autumn Budget and Spending Review, the Chancellor officially extended the ‘30-day’ reporting rules to 60 days.

A number of eye-catching headlines emerged from the Autumn Budget including news of Universal Credit changes and an uplift in the National Living Wage. What may have flown under the radar for many people is the news relating to the UK Property Reporting Service.

The UK Government follows guidance from the OTS

The government has followed the recommendation from the Office of Tax Simplification to provide an extension to the reporting rules relating to the disposal of UK residential property.

Since April 6, 2020, UK residents have had to calculate, report, and pay any and all Capital Gains Tax (CGT) liability on the disposal of residential property in the UK within 30 days of completion. This has been done via the UK Property Reporting Service. However, the process has not been working effectively for many people, and following a review from the experts at OTS the government has now implemented change.

As of 27 October 2021, the deadline for UK residents to report and pay Capital Gains Tax on the sale of UK residential property has been extended to 60 days after completion. Equally for non-UK residents disposing of any type of property within the UK the deadlines have also been extended from 30 days to 60 days.

These changes have been welcomed by many and will hopefully help to reduce levels of errors, inconsistencies, and tardiness when it comes to reporting.

Filing challenges

The 30-day window for submitting all the necessary files was challenging for many taxpayers and agents for a number of reasons.

Firstly, people who were not aware of the reporting requirements often did not have enough time to fulfill all the necessary steps once they were made aware. They often requested assistance too late and were left with hardly any time at all to complete their filings.

Secondly, some also found the online reporting system difficult to work with and a hindrance to their ability to deal with their CGT liabilities. Often, the 30-day window did not provide enough time for these technical problems to be worked through.

These problems resulted in plenty of late filings. For example, in the last six months of 2020 HMRC issued 13,113 late filing penalties for those who missed the 30-day tax window.

These penalties to landlords and second homeowners amounted to around £1.3 million across the last six months of 2020. Evidently, the system was not functioning in a sustainable or reasonable way. At the time, a HMRC spokesperson said: “Moving customers closer to real-time transactions helps ensure they still have money available to settle their CGT liability. We don’t want to collect penalties, just help customers get their tax right.”

There have already been many late filings but as we move closer to the end of January 2022, and the whole 2020-21 tax year has perspective, we may find that many more property returns should have been reported.

Now that the government has implemented OTS’ recommendation we expect the majority of these filing challenges to be reduced, as agents and taxpayers now have more time to prepare and submit reports.

Improved guidance

Alongside the extension to the filing timelines, the OTS and HMRC have also been working on improving the level of guidance available to individuals who are submitting reports without the assistance of a professional agent.

The OTS has stated that approximately 60% of returns are filed by taxpayers themselves and that the level of guidance for these individuals is not up to standard. HMRC has begun to address this issue by working with various bodies and institutions to improve guidance regarding the technical aspects of the legislation and the practicalities of interacting with the UK Property Reporting Service.

Going forward

From the perspective of nearly everyone involved, this extension to the filing window is a positive change. However, we also understand that there are many advisers who would have preferred a complete overhaul to in-year reporting and payment. At the moment this seems like a distant possibility.

The cash flow benefits to the Exchequer that result from in-year reporting mean that it is unlikely that in-year reporting will be scrapped altogether any time soon. Nevertheless, the process has now become smoother and, for those still skeptical, there is room for improvement in the future too.

To learn more about your Capital Gains Tax (CGT) liability on the disposal of residential property in the UK or for Non-residents and to receive expert advice visit our website.

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