Reporting residential property sales – taxpayers in limbo

UK resident taxpayers have been required to report any disposals of UK residential property to HMRC via its UK Property Reporting Service since 6 April 2020. Initially this was required within 30 days of completion; however, for completions on or after 27 October 2021, this was increased to 60 days. For taxpayers within Self Assessment, disposals also need to be reported on their relevant Self Assessment tax return.

Since this reporting was first required for disposals during the year ended 5 April 2021, for some taxpayers, it may only have become apparent that they had missed this earlier reporting requirement when it came to preparing their 2020/21 Self Assessment tax return.

The issue with completing Self Assessment tax returns first is that taxpayers are then unable to complete HMRC’s UK Property Reporting Service afterwards. The message that is given states that the taxpayer cannot use this service and that they will need to add details of the property sale to the Self Assessment tax return, which they will have already done.

This leaves the taxpayer in limbo without knowing how to fulfil their reporting obligations – even though HMRC is now aware of the disposal and any tax, if any, should have been paid, (and as a result, the additional reporting may feel slightly arbitrary at this point), the two HMRC systems do not connect. The legislation states that they are still required to report the disposal via the UK Property Reporting Service and there are penalties for not doing so – which may potentially increase, the further it is delayed. 

In April 2022, HMRC said that in this situation the taxpayers should report the disposal via the Property Reporting Service first, however what if it is too late and they have not reported disposals in that order? Earlier this month, the ICAEW advised that it has requested that HMRC provides clarification on what taxpayers should do in this scenario. However, taxpayers need certainty on how to deal with this now, and they could be subject to increasing penalties whilst waiting for HMRC guidance on the matter.  

Such taxpayers would be well advised to write to HMRC to notify them that they are aware of the failure and request confirmation of what to do in this situation. This may well put a line in the sand and could help to mitigate future penalties once HMRC decides how to deal with this matter.