Pay Capital Gains on Property in 30 days
As you may be aware, HMRC have introduced new Capital Gain Tax reporting rules from April 2020. If you are:
- a UK resident individual or trustee and
- disposing of UK residential property
- and contracts for the property are to be exchanged on or after 6th April 2020
then a new “UK land return” must be filed and an estimated CGT amount must be paid to HMRC within 30 days of completion. Where properties comprising residential and commercial parts are disposed of, the new rules will only apply to the residential element. The new rules will not apply to:
- disposals where the individual has lived at a property, without a significant break, since acquiring it or
- in circumstances when the profit on disposal of a property is £12,300 or less, for example if a property is bought and sold in quick succession.
Clients who are already within the Self Assessment system are not exempt from the new reporting requirements. To enable an efficient processing of the land return and to meet the 30 day deadline, it will be Important that the following information should gathered (if possible):
The occupation history of a property – that would help us to calculate quickly if 100% PPR applies or not.
- If a property comprises residential and commercial elements, could you advise if your client could liaise with their estate agent to ascertain a just and reasonable split of the disposal proceeds between residential and commercial? The same would be needed for the acquisition cost so this would be the opportunity to get an historical valuation carried out.
In 2018, the government proposed that CGT would be payable “on account” within 30 days of the completion date for all UK residential properties disposed of by a UK resident. This change was due to come into effect on 6 April 2019 to coincide with the new NRCGT rules, but it was delayed until 6 April 2020.
The “on account” description of the tax payment is a misnomer as the full amount of CGT will be payable within 30 days, alongside a new online property disposal return. I suspect this return may look much like the existing real-time CGT report, except it will be possible for HMRC to enquire into the property disposal return independently of the taxpayer’s SA return.
If there is no gain to report or the gain is covered by exemptions or losses, the taxpayer won’t have to complete a property disposal return. It seems a lesson has been learned from the hundreds of late-filed NRCGT returns which reported little or no gain.
If there is a taxable gain to report, the taxpayer must calculate the CGT due taking into account their annual exemption for the year and guess at the correct rate of CGT to apply (18% or 28% based on 2019/20 rates).
After the end of the tax year, the taxpayer will complete their self assessment tax return, including the property gain. Once their full income, gains and losses for the year are calculated, the true amount of CGT will be ascertained and any “on account” payment will be deducted. This could result in a repayment of CGT for the taxpayer.
LHP can prepare the CGT return on your behalf for a fixed fee. If you would like more information regarding this, please contact our tax advisors on firstname.lastname@example.org or ring 01267 237534.