Capital Gains Tax on second homes: why you need an up-to-date passport

by Michael Blaken

Published on 9th February 2021

From April 2020, anyone selling a property where Capital Gains Tax (CGT) applies has needed to settle this liability within 30 days of the completion of the sale. Prior to April 2020, they had until the end of January after the tax year in which the gain arose.

Capital Gains Tax on second homes

But this change has had a big impact, because of the relatively short 30 day window now available to set up a CGT account with HMRC and then pay the tax.

The problem has arisen because HMRC has set up a standalone digital service to deal with CGT which does not interact with the self-assessment system.

So if you have sold an additional property then you must set up a CGT UK property account regardless of whether you are reporting the gain yourself or whether you are appointing an agent – such as the Swindon accountants here at Optimum – to report the gain.

The problem arises at the identity verification stage. The only way to verify your identity is by using a passport. But if your passport is not current, or you do not have a UK passport, then the process stalls.

At Optimum, we have come across several cases where clients have extreme difficulty in verifying their ID.

For example, we have a client in his 70s who has lived in the UK for decades but holds a US passport. In other instances, we have clients whose passports have expired, and again they have been unable to get through the verification hurdle in order to then go on to complete the CGT declaration.

Contacting HMRC is currently very difficult. With HMRC ‘on hold’ times severely worsened due to the Covid crisis, we and our clients have been waiting hours to get through.

What’s the solution?

If you experience this problem, and are unable to meet the verification demands, then there seems to be just one option: get through to HMRC, explain that you are ‘digitally excluded’ and ask to be to be allowed to complete a paper return (via form PPDCGT). This paper return is not available online to be downloaded as it will be pre-populated by HMRC with some of your details before being issued.

Given the very short timeframe, we’d strongly advise contacting HMRC as soon as possible – even ahead of the property sale – to ensure you get hold of the paper form and can return it in time, to avoid any penalties.

Clearly this issue is an unintended consequence of the new rules on Capital Gains Tax liabilities. Our Swindon conveyancing team can advise on Capital Gains Tax and second homes, as well as offer any legal advice around buying or selling property.

If you would like to engage our services please get in touch and we would be happy to give you a competitive quote. You could find more general information about CGT here.

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