How to reclaim CGT paid on account

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July 14, 2021

The disconnect between self-assessment and the UK Property Reporting Service for paying CGT.

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.

Most of the tax profession assumed that if a taxpayer overpaid during the year it would be straightforward to recover any difference through the usual self-assessment process.

Overpayments of CGT are quite likely, as total income for the year would only be estimated at the time of the property sale, and any capital losses realised post-completion can only be offset via self-assessment.

Recovering overpayments

In practice, it has turned out quite differently. While the SA108 pages have been updated to include details of gains on UK residential property reported in a 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.

The result is that a UK residential individual who has paid CGT of £7,000 on account during the year via a property return but has a final CGT liability of £5,000, will not be able to offset the excess of £2,000 against their income tax liability automatically, nor will the amount show as recoverable under self-assessment.

HMRC workaround

The only way to recover or offset the overpaid £2,000 in these circumstances 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.

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