CGT DUE WITHIN 30 DAYS
Under current rules, taxpayers do not have to complete a tax return and pay the CGT until the self-assessment deadline of 31 January after the tax year in which the disposal is made, potentially giving them up to 22 months (the taxpayer is required to register by 6th October). For example, if the disposal arises on 1 June 2018, the CGT is due on or before 31 January 2020.
From 6 April 2020, certain disposals of residential properties are required to be notified to HMRC within 30 days of the completion. A CGT return will need to be completed and submitted to HMRC, along with a mandatory payment on account (where applicable).
In addition, the gain will still need to be reported in the usual way via the self-assessment tax return. N.B, this only applies to taxable gains on disposals of UK residential properties which are made on or after 6 April 2020. If contracts are unconditionally exchanged in the 2019/20 tax year, but completion takes place after 6 April 2020, the 30-day submission requirement does not apply.
Furthermore, a return and payment on account within 30 days of completion will not be required where there is no tax payable, e.g. the gain is fully covered by private residence relief, brought forward losses or the annual exemption.
CGT PENALTIES
There will be immediate penalty of £100 if you don’t file the UK land return within 30 days of the UK residential property disposal. If the return is more than 6 months late then a penalty will be, higher of £300 or 5% of the tax due. If the return is more than 12 months late then a further penalty will be payable which is, again, higher of £300 or 5% of the tax due.
HMRC might charge the £10 daily penalty up to 90 days (between 3 months and 6 months of filing date) but by concession HMRC has stated that it will not usually charge these daily penalties.
CGT RATES
Higher-rate taxpayers pay 28% on gains from residential property, while basic-rate taxpayers pay 18% (or 28% depending on the size of your gain, your taxable income and amount above the basic rate).
The Capital Gains Tax changes are set to take place on 6 April 2020. Those considering selling a property that may be subject to CGT (Capital Gains Tax), are advised to consider making the disposal before the changes take effect. Contact us for specific property tax advice.
Whilst the above applies to certain residential property disposals, the following changes mainly affect taxpayers who have occupied a residential property as their main residence and have also let the property out at some point during the period of ownership.
REDUCTION IN FINAL PERIOD EXEMPTION
Under current rules, provided that a property has at some point been the owner’s only or main home, the last 18 months of ownership always qualifies for Principle Private Residence (PPR) relief. This applies whether or not the owner remains living in the property during this period, in order to allow for practicalities of selling and moving.
From 6 April 2020, this 18-month exemption will be reduced to nine months, meaning that an additional nine months of gain may (if the owner is no longer in occupation of the property during this period) be subject to capital gains tax.
It should, however, be noted that existing rules allowing a 36-month final period exemption for disposals by long-term care home residents or those who are disabled remain unchanged.
LETTINGS RELIEF
Lettings relief is valuable relief for individuals who have difficulty selling their former residence and are obliged to rent it out while trying to sell It, as long as at some point during the ownership the property qualified for PPR relief.
At present, taxpayers can claim relief of up to £40,000 each. However, from 6 April 2020, the relief will be reformed so that it is only available in exceptionally limited circumstances. The portion of ownership during which it was the owner’s main residence will attract PPR relief (plus 18 months or, from April 2020, nine months) and the remaining period can benefit from lettings relief (which is capped at £40,000).
From 6 April 2020, lettings relief will be reformed so that it only applies where the owner is in shared occupation with the tenant. The change to lettings relief means that, where the owner is not living in the property, no relief will be available beyond the period for which the property qualifies for PPR.
INTRODUCTORY MEETING
CONTACT US TO ARRANGE AN INTRODUCTORY MEETING, OR FOR A QUOTE.
IAN LEIGH
Tax Partner
Ian is a Chartered Accountant who has specialised in tax since 1985. Ian advises owner managed businesses, public companies, private clients and trusts on the broad range of taxes and has extensive experience of international tax, domicile and residence issues. Ian also has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility Code of Practice 9 and the Contractual Disclosure Facility.
ANDREW LEWIS
Tax Manager
Andrew manages the firms personal tax department, including a portfolio of personal tax clients such as High Net Worth Individuals, Self Employed, Directors, Landlords, Non-Residents and Partnerships. Andrew also has significant experience in dealing with HMRC tax investigations and disputes including Section 9A enquires, the Worldwide Disclosure Facility (WDF), Code of Practice 9 and the Contractual Disclosure Facility.
