From 6 April 2020, the way CGT has to be paid, and returns filed, has changed for UK resident individuals, trusts and personal representatives.
CGT will now need to be filed and paid within 30 days of completion of the disposal if:
- the contract was exchanged on or after 6 April 2020 (or, in the case of a conditional contract, a condition was satisfied on or after 6 April 2020, whenever the contract was entered into);
- the interest disposed of is UK residential property e.g. the sale of a house; and
- that person is making a chargeable gain (if a loss is made or if private residence relief applies then a return is not required).
The return has to be made in a digital format using HMRC's new online service. If the taxpayer is in the self-assessment regime the online return still needs to be filed within 30 days and then declared as usual on the self-assessment tax return. Any overpayments of CGT can be reclaimed by way of the self-assessment or an amendment to the online return.
What is residential property?
The CGT rules consider buildings that are suitable for use as a dwelling to be residential property. This includes land that is used or intended to be used with a dwelling. There has been case law and HMRC guidance on this point, and as such it can be a grey area.
There are exceptions such as certain nursing/care homes, purpose built student accommodation and hotels/holiday lets, however the exceptions are narrowly defined and it will depend on the facts and characteristics of each property.
Where mixed-use property is being disposed of, the tax payer has to make an apportionment of the value and report the gain that relates to the residential part.
Personal Representatives and Trustees
As the new payment and reporting deadlines apply to personal representatives and trustees as well as to individuals, it is important that they are aware of the deadline and filing process before completing a sale of property. If the 30-day deadline is missed then PRs or trustees can be personally liable for any late filing or late payment penalties.
A common example would be executors of an estate disposing of the deceased's property. In most cases, private residence relief does not apply when executors sell the deceased's home and so a return is likely to be required if the property has risen in value during the estate administration period.
Non-resident individuals and trustees have been reporting and paying CGT within 30 days since 6 April 2015 for residential property and 6 April 2019 for all other property. These changes simply align the rules for UK and non-UK individuals. However, the non-resident filing requirements apply to a greater range of disposals including direct disposals of all UK property and indirect disposals of all UK property (e.g. a sale of a property investment company). In addition, the circumstances in which a return is required are broader as a gain does not need to accrue.
One administrative change for non-residents, is that those within the self-assessment system can no longer defer the 30 day filings requirement to the self-assessment period. All disposals must be reported within 30 days regardless.
Whilst the introduction of this new reporting system has not been delayed, HMRC has confirmed it will not charge late filing penalties for late reports of capital gains tax (CGT) on disposals of UK residential property by UK residents provided they are made by 31 July 2020. (Any interest on late payment of tax may still be charged).
If you are disposing of property and would like advice on this for example as to whether a gain has accrued and the reporting requirements apply or whether the property is residential or not, please do contact Karmeni Shahi or Iain Aitken to discuss where we can assist.