Trusts & Estates: Tax Update – 60-day CGT Reporting Requirements & Pitfalls to Avoid

You may have seen the welcome news that the reporting time limit for reports of gains on residential property has been extended from 30 days to 60 days.

Anthony Whittaker, our Senior Manager on Trusts and Estates has been heavily involved in supporting our client base in adapting to these new reporting requirements, advising our solicitor clients on supporting their clients on such matters. We therefore thought that this would be a good time for Anthony to recap on the guidance and provide some practical advice:

  • Personal Representatives (PR) are now required to report property disposals within 60 days of completion where a gain arises; The HMRC advice can be found in the following link under the heading ‘If you’re a capacitor or personal representative’. Capacitor is a new term and refers to someone who helps someone else deal with their tax. HMRC have confirmed that this does not encompass agents;
  • The guidance covers the position where a PR is making the report. They are advised to do this using their own Property Account;
  • Once the CGT return has been submitted, for estate administration cases only, it goes into a manual system. This means it will not be possible for the PR to see the submitted return when logging back in in order to make payment within the expected 60-day period;
  • HMRC  advice is to download or print a copy of the return for your records because once the return has been sent to HMRC it will no longer  be available online to view or amend online;
  • HMRC then write to the PR requesting payment separately and giving a new time limit for payment. The PR can expect to be asked to pay within 14 days of HMRC issuing the demand (or the usual 60-day deadline if later);
  • An agent is not permitted  to have a Property Account in the name of the agency, which means they cannot follow the steps above for their client;
  • There is currently no procedure for agents to report digitally on behalf of estates/PRs and there is unlikely to be any such functionality in the near future (they would need to complete paper forms in these cases).
  • However, since anyone with a property account has the option of reporting on behalf of another person, HMRC have noted that it is possible for the PR to use their own, personal property account to report the disposal by the estate and they can then appoint an agent to do this via the usual digital handshake;
  • There are some caveats to this approach, which are flagged in the HMRC guidance:
      1. The agent will be able to see any reports of disposals made personally by the PR – which will not be appropriate in all cases.
      2. Appointment of the agent for the estate will displace any agent previously appointed for the PR’s personal affairs.
  • Digital reporting for an estate will therefore only probably suitable where the agent also acts for the PR in a personal capacity. Where the PR is a professional such as a solicitor, then the paper form will probably remain the best approach;
  • A further concern for estates is the interaction between the reporting requirements under the 60-day reporting rules, and the informal procedures for an estate;
  • Under the informal procedures, a non-complex estate does not need to register for a Unique Taxpayer Reference (UTR) (which would be obtained via the Trust Registration Service (TRS)), but instead the PRs or their agent submit an account by letter after administration is complete;
  • Informal procedures are available provided that the total tax due under self-assessment (i.e. CGT and Income tax) for the entire administration period is under £10,000, the estate is valued at under £2.5m and the value of assets sold in any one tax year are under £500,000;
  • It is therefore possible for an estate to make a property disposal such that it remains within the informal procedures (so no need for self-assessment or a UTR) but still be within the rules for reporting and paying CGT within 60-days on a residential property disposal. HMRC have confirmed that such an estate can still benefit from the informal procedures and will not be forced into self-assessment as a result of the property reporting requirements;
  • In these cases, a PR reporting on behalf of the estate would create a Property Account in their own name using their own credentials. Once logged into their account, they will be able to submit a CGT Return on behalf of the estate, by providing personal details for the deceased which could (but does not have to) include the deceased’s UTR, if they have one;
  • When the estate then makes a payment of the balance of CGT and Income tax for the administration through the informal procedures, the PRs will need to quote any reference numbers relating to the earlier CGT payment to enable HMRC to link both payments together. This may include the PRs Property Account, although care will be needed if the PR has also reported other gains made in their own name;
  • When an agent is acting for the estate and doing the reporting on behalf of the estate it will be necessary to report on a paper return;
  • If the estate opts to finalise its wider tax affairs (i.e. files a self-assessment return or makes a report under the informal procedures which includes the CGT on the property disposal) within 60 days of completion of the property sale, then there is no need to report via the Property Account at all. This will potentially be of benefit in those cases when the property sale occurs just before the estate administration is completed.

Not the most intuitive or straightforward process and a very tight turnaround time so it is strongly suggested that the approach is agreed in plenty of time and any required property accounts set up before sale takes place. 

The Society of Trust & Estate Practitioners (STEP) had contacted HMRC earlier this year in relation to the difficulties that arise if an estate unexpectedly becomes complex during the administration period. HMRC has now clarified that a self-assessment tax return will not be required for the years in which the estate otherwise met the informal estates criteria.

Now, the SA900 tax return will only be needed for the tax year in which the gain is realised on the assets valued over £500,000. The informal arrangements made for the previous years will remain acceptable. This process will not be applicable for all cases and HMRC will accept this process only in cases where there has been uncertainty over the valuation or there is an unexpected sale or gain.

This outlines some of the issues involved and should you require any further guidance or assistance with your filing requirements, or any tax planning that we could consider when new estates arise, then contact Anthony at anthony.whittaker@bennettbrooks.co.uk