Taxpayers face more penalties as property disposals must be reported twice

Even if a self-assessment (SA) tax return has already been submitted declaring the gain, HMRC has confirmed that a capital gains tax (CGT) UK property return must still be filed using a paper return rather than via the online UK property account.  

The only exception is where the SA return is filed within 60 days of the transaction completing, meaning that the SA return is filed before the due date for filing the CGT UK property return. In this situation, a separate CGT UK property return is not required.

Taxpayers will need to contact HMRC in order to obtain a paper return which can take time and could result in them missing the relevant deadline. In a recent Freedom of Information request submitted by RSM UK, HMRC confirmed that 25,300 CGT UK property returns were submitted after the deadline in the 2020/21 tax year and 23,600 CGT UK property returns were filed late in the 2021/22 tax year. 

The number of returns that are submitted late on a monthly basis is starting to decline following the extension of the deadline from 30 days to 60 days for transactions completing after 27 October 2021. In the quarter to 31 March 2022, 2,000 returns were submitted late, compared to 7,400 in the same quarter a year before. 

A £100 penalty is imposed for returns submitted later than 60 days following completion, with further penalties due if the return is still outstanding after six and twelve months. It is therefore likely that a minimum of £2.36m in late filing penalties were issued for the 2021/22 tax year. The latest clarification by HMRC and the requirement to request a paper tax return could lead to further penalty pain for taxpayers. A more sensible approach would be for HMRC to allow taxpayers to download the relevant returns from its website rather than having to make a request.  Taxpayers who have failed to submit a CGT UK property return on the basis they had already disclosed the disposal on their SA return could be in for a nasty shock.