Capital Gains on UK Residential Property Disposals now due within 30 days

29th June 2020

Payment and reporting terms in respect of any capital gains on UK residential property disposals have changed as of 6th April 2020 for UK resident taxpayers.  From now on a return will need to be submitted to HMRC within 30 days of the completion of the sale.  Read on to find out your obligations in this area.

capital gains on UK residential property disposals

What has changed?

For UK resident taxpayers, payment on any capital gains accrued during the sale of a UK residential property disposal has historically been due on 31st January following the tax year of the property sale, with details being reported in the self-assessment tax return.

From 6th April 2020 the requirements changed, with all payments and reporting now due within 30 days of completion of the sale, in what is known as a ‘UK Land Return’.  Applicable to both individuals and trusts, the following requirements are now in place following disposal of a UK Residential Property by a UK resident taxpayer:

  • Within 30 days of completion of sale you must submit a return to HMRC, with details of the disposal and a calculation of any capital gains accruing
  • If you ordinarily complete a self-assessment return, you will need to re-submit the same information regarding your property disposal at that time (usually 31st January).  If you have no other reason to complete a self-assessment, you will no longer be required to submit one solely for the reporting of your property disposal.
  • Any Capital Gains Tax due on the disposal is payable within 30 days of completion of sale to HMRC.  This is effectively a “payment on account” for your end of year tax liabilities.  You should work out any capital gains as if the date of completion were the end of the tax year but this calculation can be complex, dependent on accurate valuations and an understanding of other influencing income and exemption factors.   HMRC accepts that the initial calculation will be an “estimate” that may result in a future refund or additional tax payments at the point of the annual self-assessment return.  You will be required to pay any interest on the difference as well as any underpayment penalties should the final calculation be more.
  • If the property is held by more than one person or in a partnership then each party must submit a UK Land Return and pay the tax for their proportion of the sale
  • If more than one property is disposed of on the same completion date then they may be submitted in the same return

 

What happens if I don’t comply?

If you are late on either your returns or your payment for any capital gains on UK residential property disposals then you will be liable for a late payment penalty and any interest accrued.  The penalties start at £100 and can be as much as 5% of the tax due once over 6 months late.

This ruling is applicable for any sales from 6th April 2020 and so you should make your tax adviser/accountant aware of any residential property disposals you have made since this date if not already done.

Exemptions

Within the guidance of the legislation, any holiday homes, second homes, those with large grounds and buy-to-let properties will incur capital gains upon sale, therefore requiring a UK Land Return and any associated payments. The following are exempt:

  • Any disposal of commercial property or property not within the UK
  • Any disposal where no CGT is incurred due to annual exemptions, relief (e.g. PPR relief) or capital losses brought forward
  • Any sales that did not lead to a gain or loss, such as if a property were transferred between spouses
  • If a property has both commercial and residential parts, then the UK Land Return need only be applied to the value of the property that is residential
  • Any charity or pension scheme disposals
  • Grant of a lease for no premium to an unconnected party under an arm’s-length bargain

 

Non-UK residents

The rules for non-UK residents have not changed.  Any disposals for non-UK residents of residential property have been subject to the 30-day rule since 6th April 2015.

What should you do now?

You should ensure that the gains on any residential properties that you have sold since 6th April 2020 have been properly reported and a payment submitted to HMRC.  Seek professional assessment of the accuracy of calculations – the final liability will depend on other income influences, annual exemptions and reliefs (such as PPR relief) within the tax year and, although it is acknowledged that the initial amount will be an estimate only, you should ensure you are as accurate as possible at the point of submission to avoid heavy interest or penalty payments at the end of the year.  Contact your accountant or tax adviser as soon as possible to help with this and to plan in advance for any corrections that may be due at the end of the tax year.

We can help

At TTR Barnes we understand the legislation governing Capital Gains Tax related to UK residential property disposal.  Talk to one of our experts in the tax team today to ensure you are compliant and tax-efficient.  

 

All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time.  This article is for general information only and does not constitute financial advice or recommendations for individual circumstances.  No responsibility is taken for any actions taken on the base of the information within this article. You should not rely on it for making any investment decisions and should use professional financial advisors in this respect.

 

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