HMRC has clarified that, with one exception, a CGT property return must be filed even if the disposal has already been reported on a self-assessment return. ICAEW’s Tax Faculty explains the rules and the impact on penalties.

The government introduced the requirement to report disposals of UK residential property and pay the capital gains tax (CGT) arising within 60 (previously 30) days of completion on 6 April 2020. Non-residents are required to report the disposal of a wider group of assets, even if there is no gain.

Many transactions that should have been reported on a CGT property (PPD) return were not identified until 2020/21 self-assessment (SA) returns were being prepared. It is not possible to file a CGT PPD return online after a SA return has been filed.

HMRC has previously advised that the CGT PPD return should be filed before the relevant SA return. In the interests of meeting the SA filing deadline (and given the difficulties with the CGT PPD system), many taxpayers and agents filed the SA return without first having filed the CGT PPD return.

It is most unsatisfactory that it has taken HMRC almost six months to reach the decision that, where the SA return has already been filed, the CGT PPD return must still be filed, but on a paper return. However, this decision was somewhat inevitable. It would have been inequitable to excuse some taxpayers from the filing requirement or not to charge penalties when they have been charged to others who filed late.

The one exception to the requirement to file a CGT PPD return is where the SA return is filed within 60 days (or 30 days as applicable) of the transaction completing. In this situation, the legislation is written so that a separate CGT PPD return is not required.

Agents and taxpayers should take steps to file outstanding CGT PPD returns on paper as soon as possible. Where a 64-8 authorisation is held, HMRC should issue a paper CGT PPD form to report a disposal of UK residential property to the agent on request when they phone the agent dedicated line.

HMRC will charge penalties and interest. In most cases, the taxpayer will have paid the relevant tax for a disposal in 2020/21 by 31 January 2022. Interest would have stopped running when the payment was made. The professional bodies have asked that late filing penalties should take into account the six-month delay in HMRC making the decision on how the returns should be filed.

This decision adds to the list of situations where a paper CGT PPD return is required. The Tax Faculty has written to HMRC to request that the form be made available on gov.uk