What is a post transaction valuation? When you sell an asset, you will need to report this to HM Revenue & Customs (HMRC) and pay any Capital Gains Tax (CGT). But you may not have sold the asset in question at market value so what do you do?
In that case, you need to know that HMRC offers all taxpayers a post-transaction valuation check (PTVC). They review your valuation and work out your Capital Gains Tax liability, which will help you complete your Self-Assessment tax return. It is available to all taxpayers, individuals, trustees, and companies.
You are not required to take up the HMRC offer but it is best practice because it offers you protection against any future queries. This is because once the PTVC is agreed, HMRC will not challenge the use of it in a self-assessment tax return.
Who should get one?
PTVC’s are normally beneficial in transactions between parties that are ‘connected’, such as developers and buyers of properties they develop or sell together.
The CG34 can be used for land, shares, goodwill and other assets that are subject to Capital Gains.
How do you request one?
You can only request a post-transaction valuation check after you have disposed of an asset that is subject to Capital Gains Tax, but before the date you need to submit your Self-Assessment.
If you want to complete your Self-Assessment tax return, you can complete the form CG34 three months before the tax return filing date.
However if you are disposing of a residential property you are required to report the capital gains within the 60 day limit. In which case you can use an estimate. But remember once you receive the PTVC you must amend the return.
A useful note is to remember that the CGT reporting system is not integrated with the Self-Assessment system. This makes it difficult because if you need to make amendments paper versions are required and are obtained via telephone calls. Hard to believe we know but HMRC says they are developing the systems.
The CG34 form can be downloaded from the HMRC website. Once completed, you need to mail it to the relevant address on the last page of the form.
Details required for CG34
HMRC will need your details, the valuation date and the proposed value on that date.
You may also need to submit supporting documentation, such as an independent valuation report. For land valuations, you will also need to provide:
- A copy of the current lease if it is a leasehold property
- Current tenancy agreements if the property is let at the time of valuation
- Plans showing the land location if it is undeveloped land
How long does it take?
It can take at least 3 months for HMRC to check your valuation. Therefore, it’s extremely important to send the CG34 form and all supporting documents a minimum of 3 months prior to your Self-Assessment filing date.
We recommend that you submit the documents as soon as possible after the disposal of the asset(s).
How do you report a gain if not completing a tax return
If the asset in question is a residential property, then you will report it via the 60-day deadline mentioned earlier.
However, if the asset in question is something else than you report your gains using the “real time” by visiting specific pages on GOV.UK. You can use the “real time” facility until 31st December after the tax year ends.
For example, an asset given away in February 2022 can be reported until 31st December 2022. But you must apply for a CG34 latest by 30th September 2022. Our recommendation is to apply soon after February 2022 in this example.
As with all taxes you will need a Government Gateway Account.
After the check
Once you have submitted the CG34, HMRC will write to you.
If HMRC agrees with your valuations, they will not question your use of those valuations in your tax return unless there are any important facts that you did not disclose to them.
If HMRC does not agree, they will suggest alternatives and allow you to discuss your valuations with specialist valuers. You will still need to file your return by the due date.
The whole system of requesting a PTVC, reporting capital gains, making amendments and completing the self-assessment works fine if you are organised and know what you are doing. But there are a large number of quirks and oddities, and we would always recommend that you seek professional advice.
Here’s how Myers Clark can help you feel calm and confident about your taxes. Get in touch if you need help.