The reporting and payment of capital gains tax for UK residents disposing of UK residential property is changing with effect from 6 April 2020.
A brief summary of the changes:
- The new rules affect UK resident individuals, trustees and personal representatives of an estate.
- The new rules similarly apply to persons who are not tax resident in the UK.
- The changes mostly affect residential property held for investment (at the time of any intended disposal we suggest you seek clarity of the tax status of any property you may own) disposed of on or after the 6 April 2020. The date of disposal will normally be the date of exchange.
- For a disposal on or after the 6 April 2020, the disposal must be reported and any capital gains tax due paid within 30 days of completion.
- The gain is reported via the “Capital Gains Tax on UK property service” (the “digital service”), which will apparently go live on the 6 April 2020.
- There is no requirement to make a submission via the digital service if there is no tax liability (due to PPR, annual exemption, losses brought forward, current year losses incurred on or before the date of completion etc)
- There will be a calculator on HMRC’s website to estimate the tax. You need to decide whether the gain is taxed 18%/28% (assuming these rates still apply after the budget), you can use the annual exemption, PPR and available losses when calculating the gain.
- The digital service will be available on our agent HMRC login but in order to file the Return on the client’s behalf, we need to be authorised to use their government gateway account, however there seems to be very limited information about this at the moment!
- The gains must also be shown on the individual’s Tax Return if they usually file one. If the individual does not usually file a Tax Return and they have no other reason to file a Return, they will not need to file a Tax Return to report the gain (but will still report via the digital service).
- Each sale will require a separate submission via the digital service unless multiple disposals occur in the same tax year with the same completion date.
- You can amend a submission on the digital service for up to one year. Alternatively, the figures can be amended on a self-assessment Tax Return.
- Losses on UK residential property can be used against earlier UK residential gains in the same tax year and can generate a repayment if submission is made via the digital service.
- Penalties for late submission via the digital service: £100 if late, the higher of 5% of the outstanding tax or £300 if not filed within 6 months, a further higher of 5% of the outstanding tax or £300 if not filed within 12 months.
- Non-residents will also have to use the digital service in respect of disposals on or after the 6 April 2020 and will have to file and pay the tax due within 30 days of completion.
If you would like to discuss the changes please feel free to contact your Engagement Partner or one of our tax team on 01923 776818.