From 6 April 2020, a UK resident taxpayer selling a UK residential property where Capital Gains Tax (CGT) is due will need to report and pay CGT within 30 days of completion. The change is only a timing issue and, provided you meet the 30-day deadline, you will not actually pay any more tax than you would do if you sold the property before 6 April 2020. Penalties will apply if the reporting is late.
Prior to the change, all UK resident taxpayers who sold property reported and paid tax on the gain when they sold the property on 31 January following the end of the tax year in which they made the disposal. The change brings UK resident taxpayers in line with non-UK resident taxpayers.
Do remember that CGT is not just payable when a property is sold - gifts or transfers into trust or a company will have the same reporting and payment requirements.
There are some exemptions reporting will not be required including, where the gain is covered by Principal Private Residence (PPR) relief throughout the duration of the taxpayer’s ownership, where a loss arises on the sale of the property, where the gain is sheltered by capital losses crystallised before the sale takes place or where the gain is small enough to be covered by the taxpayer’s annual exemption for the year of disposal.
In short, reporting will be required for let properties, second or holiday homes and homes not fully covered by PPR relief. Reporting isn’t required if the property is not residential or where the property is situated outside the UK.
Due to the current situation and concern that the new rules have not been well publicised, HMRC is allowing a period of time to adjust. As a result, no late filing penalties will be issued for CGT payment on account returns received late up to and including 31 July 2020. So any transactions completed between 6 April and 30 June 2020 will need to be reported by 31 July 2020, and transactions from 1 July 2020 within 30 calendar days. Interest will accrue if the tax remains unpaid after 30 days.
HMRC have also announced that a “flexible approach” will be taken if someone has encountered difficulties due to the Covid-19 crisis and more information can be found on www.gov.uk
Do contact Jacqui Birks at firstname.lastname@example.org for more information.