Capital Gains Tax extension gathers support
- Published: Tuesday 25 May, 2021
- By: Commercial Trust
The Office for Tax Simplification (OTS) has made a range of proposals to the government, including an extension of the 30-day payment window of Capital Gains Tax (CGT) when disposing of a property.
They recommend that the timeframe to pay the tax should sit at 60 days instead.
The OTS made this recommendation, as well as 13 others, to the government to reduce confusion and dissatisfaction with how CGT is implemented.
This 125-page review was prompted by the Chancellor of the Exchequer in July 2020, to “help ensure the system is fit for purpose”.
A first report on the subject was published in November 2020, however, this second report considers more practical and administrative issues currently within the CGT policy.
The current 30-day deadline was introduced in April 2020 and cut the previous timeframe by as much as 22 months.
The report published by the OTS highlights that a third of the buy to let investors and property owners who had to pay CGT on property sales had failed to file on time due to the restrictive deadline.
The HMRC reported that 16,800 of 51,300 returns made between April 6th 2020 and January 6th 2021 had failed to meet the deadline.
During the consultation period of the report, OTS noted that the comments surrounding the 30-day deadline were “overwhelmingly negative”.
The report also called the timeframe “ambitious” and “a cause for concern”.
Chris Norris, policy director for the National Residential Landlords Association (NRLA), welcomed the suggested change:
“Landlords should always ensure they meet all legally required deadlines to pay tax.”
“That said, today’s report from the Office for Tax Simplification demonstrates a woeful lack of communication and consideration by HMRC about what is expected of those liable for the tax. It adds weight to the argument that the seemingly arbitrary, 30-day deadline has created more problems than it solves.”
“We would support the OTS in recommending an extension to 60 days to avoid landlords missing a shorter deadline, potentially through no fault of their own.”
Richard Jameson, partner in the private wealth team at Saffery Champness, said:
“The problems often come with large and relatively-complex transactions such as selling a property, when there is a lot of paperwork and legal hoops to jump through.”
“Particularly at a time like this when the property market is very buoyant, conveyancers are in high demand, and delays can be very common. Having all the necessary paperwork ready within 30 days, and the cash available to pay the tax bill at the same time, is just too ambitious for many taxpayers.”
“It is little wonder then that a third of the initial returns for residential property disposals exceeded the 30-day CGT deadline, and many individuals who own more than one property will welcome the OTS’s suggestion to extend it to 60 days.”
Whilst selling property may not be an everyday topic for landlords, it is useful to stay up to date on these issues when they should arrive.
The recommended extension, if it were to be taken on by the government, could mean peace of mind for landlords looking to sell, as they would have longer to get their affairs in order.
More importantly, a longer deadline means less chance of having to pay unexpected late payment fees.
It will be interesting to follow the journey of this extension and see if it makes its way through parliament.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.