Sale of UK Residential Property – Awareness of new rules

The government implemented changes to the Capital Gains Tax (‘CGT’) rules from 6 April 2020 in relation to the sale of UK Residential Property.

The previous rules required that a taxpayer report to HM Revenue & Customs (‘HMRC’) when they made a disposal of a chargeable asset (in this case UK Residential property) and to inform HMRC of such an event in their Self-Assessment Tax Return (‘SA Return’), which is to be filed electronically no later than 31 January following the end of the relevant tax year (06/04/XX to 05/04/XX).

The new rules require that HMRC be notified of the relevant disposal within 30 days of the property sale completing via the submission of a standalone CGT Return (‘Return’). In completing the Return, a calculation of the notional tax due is derived and that amount is payable on the same day as the Return’s submission – indeed a short window of time to collate the necessary information.

It is important to note that there is no requirement to complete a Return where no tax is due; be this through the use of available reliefs such as PPR or whereby a gain is covered by brought forward capital losses and/or the annual exempt amount. Moreover, if the taxpayer realises a loss on the property disposal then, again, no Return needs to be submitted.

How is the Return completed? Well, a standalone Return is to be completed online by the taxpayer using HMRC’s online portal, but you may authorise your agent Accountant to complete the Return on your behalf – one positive aspect of this! You will need to create a Capital Gains Tax on UK property account before you can report and pay the tax using HMRC’s service. This could be a sticking point for many taxpayers if they do not have a Government gateway account already setup. 

It should be fairly quick to set up a Government gateway, but as matters such as this can go wrong or be delayed, this administrative step should not be overlooked prior to the sale of the property. As previously stated, the 30-day period is already short, so attempting to register for the online service post-sale will cause unnecessary delays and stress.

There does not appear to be an option to complete a paper Return, but HMRC advise they will assist where an individual is unable to access the online form. HMRC does not regard this as a reasonable excuse for not doing a Return and HMRC must be contacted prior to the Return being late.

HMRC will apply penalties for both late submission of the Return and late payment of the tax due. HMRC has considered Coronavirus (COVID-19), and they will not apply a late filing penalty for any transactions completed on or after 6 April 2020 to 1 July 2020 and reported up to 31 July 2020. Transactions completed from 1 July 2020 will receive a late filing penalty if they are not reported within 30 calendar days.

It must be stressed that if you usually complete an annual Self-Assessment Tax Return or you will be required to send a SA Return for another reason, you must include details of the CGT Return made during the tax year, even though you have already reported the event and paid the notional tax due.

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