If you’ve sold a UK residential property since April 2020 and paid an estimated CGT amount due to HMRC within 30 days of the sale, you may need to reclaim CGT paid on account
Unfortunately, HMRC’s Self-Assessment system isn’t joined up with the UK Property Reporting Service for paying CGT due within 30 days of UK residential property disposals.
Since April 2020, UK residents have been required to calculate, report and pay CGT on their UK residential property gains within 30 days of completion.
HMRC describe the new in-year payment as a payment ‘on account’ of CGT. But if a taxpayer overpaid during the year it isn’t straightforward to recover any difference through the usual self-assessment process.
Overpayments of CGT can arise because total income for the year would only be estimated at the time of the property sale, and any capital losses post-completion can only be offset via self-assessment.
How to recover overpayments
The SA108 pages have been updated to include details of gains on UK residential property reported in the year via the property service – and the tax charged – HMRC’s calculation will only offset the tax charged in that way against other CGT liabilities.
Once the CGT due has been reduced to nil, any excess CGT paid is not showing on calculations as repayable, nor will it be set against any income tax or Class 4 NIC liabilities.
Any excess CGT is not offset against the income tax liability automatically, nor will the amount show as recoverable under self-assessment.
The only way to recover or offset the overpaid CGT is to follow a new workaround shared by HMRC at the end of June.
The workaround suggests either:
(a) amending the UK Property Return before submitting the self-assessment return for the year to recover the overpayment that way; or
(b) submitting the self-assessment return and then calling HMRC to ask for a manual transfer to be made of the payments showing on the property account against the self-assessment account so it can then be offset against the total self-assessment bill.
Option (a) amending online may be preferable to avoid calling the HMRC helpline. But there are times when it is not possible to amend the property return and you have to use option (b).
The legislation which governs the property reporting process is set out in FA 2019 Schedule 2. The ATT’s understanding of the legislation is that where any figures on the property return which were estimated or apportioned become known – or it becomes reasonable to make a different estimate of the rate of CGT applying to the disposal, or whether or not a relief will apply – then a new property return can be submitted containing the new facts to replace the originally submitted return.
However, amendments to the property return can only be made in specific circumstances. For example, the property return cannot be adjusted for a loss on shares made after the completion of the property disposal. That loss can only be offset via self-assessment – in which case, the agent or the taxpayer will need to ring HMRC to request a transfer of funds from one system to another under option (b). HMRC currently has no way of automating this process.