If you are selling a residential property, then you need to be aware of new 30 day CGT reporting and payment requirements which apply to disposals on or after 6 April 2020.
Currently, individuals (including trusts and executries) include disposals of property in their self-assessment tax return which does not have to be submitted until 31 January following the end of the tax year. For example, if you disposed of your property in March 2020, any capital gain would be included in your self-assessment tax return for the tax year ending 5 April 2020 which has to be submitted by 31 January 2021.
For disposals of UK residential property after 5 April 2020, however, UK resident individuals will have to make a CGT return and pay any CGT within 30 days of completion of the disposal. This includes situations where residential property forms part of a larger non-residential disposal, for example, a lodge sold with a tract of sporting land.
We want to make you aware of these news rules to assist you in preparing for any future disposal, and to ensure you have taken tax advice and engaged a tax advisor to deal with any CGT returns on your behalf. It is important to alert your tax advisor at any early stage so that there is time to calculate any gain or obtain valuations.
To whom do the rules apply ?
The rules apply to disposals of UK residential property by individuals, trustees and executors (personal representatives).
In some cases, other disposals may trigger the reporting requirement, for example, where a partnership with individual members sells a residential property, each member may be required to submit a 30 day return for their share of any gains.
When will a 30 day return be required ?
If the disposal of residential property after 5 April 2020 triggers a gain on which tax is payable, a CGT return must be submitted, and tax paid, within 30 days of completion of the transaction. These rules apply to gifts as well as sales.
If there is no gain, or no tax (e.g. if principal private residence relief reduces the gain to nil), a 30 day return will not be required.
Gains in relation to all other assets including residential property overseas do not have to be reported within 30 days.
Are there any transitional rules ?
The new rules do not apply if an unconditional contract for the sale of your property was entered into prior to 6 April 2020.
Do I still need to report the gain in my self-assessment tax return ?
If you do not normally complete a self-assessment tax return, reporting the gain by this means is now all you have to do. You do not have to register for self-assessment and complete a tax return as well
But if you normally submit a self-assessment return, disposals of UK residential property for which a return has been made under the new 30 day rules ALSO have to be included in the self-assessment returns. Credit will be given for tax paid, but additional tax, or a repayment, may be due depending on what other gains or losses were made during the year.
What types of property will trigger the 30 day rules ?
These new rules are very broad and can catch disposals which you would not ordinarily think of as residential. Potential scenarios include:
- Sale of bare land after knocking down a residential property;
- Sale of a property that is currently uninhabitable.
Will I be penalised if I do not file my tax return within 30 days ?
Yes, but not until mid-2020. HMRC has announced that no late filing penalties will be issued for transactions completing between 6 April 2020 and 30 June 2020, so long as the return is submitted by 31 July 2020, although interest will be payable on the tax.
This means that if your qualifying sale completes from 1 July 2020 onwards, if you have not filed your CGT return within 30 days, you will receive a late filing penalty and interest will accrue on any unpaid tax.
How do I report a gain ?
You can report a gain online using the new HMRC online service available at this link:
Report and pay Capital Gains Tax on UK property
Alternatively, your tax adviser should be able to make a return for you.
Time to pay ?
Despite the financial difficulties created by COVID-19, the Government considers that in most cases you will be in receipt of significant funds following the sale of a property so you should be able to pay the tax on the gain. However, if you consider that you are unable to pay the tax due they have indicated that they will be "flexible" on the matter. This will be assessed on a case by case basis.
(UPDATED 22 APRIL 2020)
Contributors
Director of Corporate Tax
Partner
Director of Personal Tax
