Late filing penalties for capital gains tax mount up

In the second half of 2020, HMRC distributed 13,113 late filing penalties, requesting undeclared capital gains figures from second homeowners and landlords across the country. 

Since 6th April 2020, where Capital Gains Tax (CGT) is due on the disposal of a UK residential property, the deadline for submitting a return and paying the tax is reduced to 30 days from the date of completion of the sale.

This aligns the deadlines for UK taxpayers with the deadlines which are already in place for non-UK residents, although non-UK residents are required to submit a return regardless of whether there is any tax due.

HMRC initially waived its £100 late filing penalties for overdue capital gains tax declarations until 30th June 2020, providing any tax owed was paid by 31st July 2020.

Since August 2020, late filing penalties have been rife among landlords and second homeowners, who have missed the 30-day deadline to report their capital gains on UK property.

An HMRC spokesperson said: “Moving customers closer to real time transactions helps ensure they still have money available to settle their CGT liability.

“We don’t want to collect penalties, just help customers get their tax right. That is why we took a lenient approach to penalties, to help customers familiarise themselves with the change in the rules, and did not issue late filing penalties for CGT payment on account returns.”

Prior to the new rules, individuals could declare any gains and subsequent capital gains tax at the end of the tax year in their self-assessment tax returns. In some cases, this gave people over 12 months before they had to declare and settle their CGT bills.

Any individual faced with a late filing penalty for capital gains can appeal with HMRC providing they have a ‘reasonable excuse’ for missing the 30-day reporting deadline. HMRC has confirmed it will include Covid-19 as a reasonable excuse in these circumstances.

Reporting and legislation for capital gains tax remains a complex area. With an abundance of reporting and payment deadlines, as well as potential reliefs and exemptions that could lead to sizeable savings, it’s important that you seek professional advice when computing your capital gains tax.

To arrange a free initial consultation about your capital gains tax situation, get in touch with our friendly and experienced team today on 0131 665 0771. Alternatively, you can drop us a line using our online enquiry form.

Date published 7 May 2021 | Last updated 7 May 2021