CGT and Residential Property Sales
Sellers of residential property in the UK, who will be liable to pay capital gains tax (CGT) on the profit on sale or disposal, will now have to tell HM Revenue and Customs (HMRC) about the gains they have made from April.
They will also be required, under new rules, to pay any tax due within 30 days from the day of completion. Landlords, those selling buy-to-let properties or second homes, and their advisers, will particularly need to note the new requirements.
The changes are in force as of 6 April and apply to both UK and non-UK residents. Under the previous rules, sellers were simply required to enter the relevant details in their self-assessment return, paying any CGT due within the usual self-assessment deadlines. That was typically not until January 31 the following year.
However, no report and payment are required if:
· The sale contract pre-dates 6 April 2020
· The seller meets the criteria for full private residence relief
· The sale or disposal is to a spouse/civil partner
· The gains (including any other chargeable residential property gains in the same tax year) are within your annual exempt amount
Guidance
As with all tax rules, they may not always be straightforward; and in some cases it will be unclear what an individual’s or organisation’s reporting and payment obligations are. HMRC’s guidance (to be updated any day now) and information on the government website set out useful advice covering issues such as when CGT should be reported, and HMRC’s new CGT online service which will facilitate the reporting and payment of any CGT owed.
Advice also covers details in respect of non-UK residents, advice for agents and also for trusts. For instance, trustees and those advising them must be aware of the tightened reporting and payment windows that they will face.
Penalties
As can be expected, those affected risk penalties being imposed by HMRC if they fail to comply with the new reporting and payment requirements. You could also be asked to pay interest on what the amount owing.
Property owners considering selling their property and may become liable for CGT must prepare for the changes. HMRC recently stressed how important it is that everyone involved with the sale of a residential property fully understands the changes.
It could prove a major cashflow issue – just when many people’s economic situations are already taking an unexpected battering in the ongoing pandemic.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you