Your Monthly Tax Update – August 2020
Reporting Property Gains Within 30 Days
Since 6 April 2020 where UK residential property is disposed of, the resulting capital gain needs to be reported and the capital gains tax paid within 30 days of completion of the disposal. There have been a number of teething problems with the new online reporting system and HMRC stated that there would be no penalties imposed for late returns, provided the returns were submitted by 31 July 2020. Taxpayers need to obtain a Government Gateway account and apply for a CGT or property reference number to report disposals, although they can authorise their accountant to report the disposals on their behalf.
Currently only the first disposal may be reported using the online reporting system with any subsequent disposals being reported using a paper return. We have been told that the new system will be fully functional shortly.
If you are planning to sell a residential property, other than one that always been your only or main residence, then do speak to us, preferably before the sale is completed. That way we can calculate the gain to report and any tax payable, and submit the report to HMRC if you wish, to ensure that you comply with the new system and do not incur any unnecessary penalties.
For any capital gains tax queries please contact Jan Friend.
Rumours of CGT Increases
There has been a lot of speculation in the Press that the Chancellor may introduce radical changes to capital gains tax to start to repay the substantial Government borrowings to support businesses and employees affected by the coronavirus pandemic.
It has been suggested that the current £12,300 CGT annual exemption could be reduced and the rates aligned with the rates of income tax. It has also been suggested that the capital gains uplift on death may be abolished following recommendations by the Office of Tax Simplification and the House of Commons Treasury Select Committee.
The Treasury Committee has recently launched a new inquiry called ‘Tax after Coronavirus’. That inquiry will consider different ways of raising taxes, in particular a thorough review of UK tax reliefs, which has also been recommended by the Public Accounts Committee.
The Chancellor has also hinted that there may be radical changes to the way that the self-employed and directors of family companies may be taxed in future.
We will of course keep you updated when any announcements are made. For any capital gains tax queries please contact Jan Friend.
High Income Child Benefit Charges Not Valid
A recent tax tribunal has ruled against HMRC who were seeking to raise tax assessments for the High Income Child Benefit Charge (HICBC) for earlier years that had not been reported to HMRC.
HICBC is a special tax charge that applies where one member of a couple in receipt of child benefit receives income in excess of £50,000 a year. The charge is 1% of the child benefit received for every £100 of income in excess of £50,000 such that where income exceeds £60,000 the child benefit is fully taxed.
The problem is that many taxpayers whose income is taxed under PAYE do not receive a self-assessment tax return and may not be aware of the tax charge.
The taxpayer in this particular case fell into that category but reported and paid the tax when prompted by HMRC. He was then assessed to tax on the child benefit for the three previous years but the court found that HMRC did not have the power to issue those assessments.
Changes to CJRS “Furlough” Claims
Note that for the month of August the Government will continue to pay 80% of employees’ regular pay for hours that they are furloughed, but will no longer pay the associated employer NICs and pension costs. The government support then reduces to 70% in September and 60% in October.
The content in this update is correct as at 13/08/2020. See terms and conditions.