HMRC Real Time Capital Gains Tax Service – How Does It Work?

Until recently, if you needed to report a capital gain to HMRC, you would need to complete a self-assessment tax return. Now there is a choice.

1) You can still use a self assessment tax return, or

2)  You can use the capital gains tax (CGT) real time service. This can be accessed by logging in to your personal tax account (PTA) or self-assessment online. You will of course need to first register for self-assessment and set up a personal tax account by visiting GOV.UK.

It is advisable that before you start this process, to work out your calculations of the capital gains or losses and to have all of the supporting information. Once you’ve accessed the service it is a matter of entering the information when asked to do so. When you are completed –  all the data is uploaded as a PDF or JPG file.

Please note that this service is for UK tax residents only. If you’re non-resident and sell a residential property in the UK there’s a different procedure to follow.

The advantage of Real Time Capital Gains Tax is mainly speed and it could save you from having to complete a tax return if you’re not already in self-assessment.

HMRC suggests using the real-time capital gains tax service so you can report the gain earlier and not have to worry about this 12 months or so down the line when you complete your self assessment tax return.

HMRC states “You can use this service as soon as you’ve calculated your gains and the tax you owe. You do not need to wait until the end of the tax year.”

In practice it might not speed matters up. If you did report a gain under the real time information service but later find you need to complete a tax return for another reason, you are then still obliged to report the capital gain once again on your tax return.

If this is the case, then it is a good idea to ensure that you show the reference number from your online report on your return. This may then prevent the chance of you getting taxed twice!

The other major issue is that if you do have an accountant, we are not able to use real-time capital gains tax for you. There is also the added problem that they will not then know what you have reported to HMRC, and this may not form art of your other tax calculations.

WHEN IS THE PAYMENT DUE UNDER REAL TIME?

The biggest disadvantage is that real time filing requires you to pay the capital gains tax at the time you use the service.

This is much earlier than the usual 31 January following the end of the tax year in which you made the gain but remember that subsequent events later in the tax year could affect the amount of capital gains tax payable (such as losses on shares). This could mean you have paid too much.

It is also worth noting that this current system is not supported by legislation and there is no clear procedure on how to claim a refund if you did overpay the capital gains tax.

It might therefore be advisable to stick with the self assessment reporting and payment of the capital gains tax after the completion of the relevant tax year.

 

If you would like our help to understand the implications in more detail for your specific situation, call us today on 02392 449732 or click on the ‘Request Call Back’ button below and we will be happy to have a chat.

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