This blog will discuss changes recently implemented by HMRC regarding Capital Gains Tax reporting requirements. As of 6 April 2020, a UK resident who disposed of a residential property in the UK making a gain which is liable to CGT only has 30 calendar days from the date of completion to tell HMRC and pay any CGT owed. This can be done using a new online service. Failure to report gains on property within the time limit may incur penalty and interest charges.
This does not apply if the residential property is their own home and has been used solely as a private residence during the time it was owned. This is because the disposal will be covered by Private Residence Relief. UK residents do not need to do anything if the gains are not charged to CGT.
In practical terms, this will mean an increased compliance burden for taxpayers. Each relevant property disposal will require its own ‘payment on account’ return in addition to the Self Assessment tax return, resulting in the potential for multiple filing deadlines throughout the year. In order to file the payment on account return, a CGT calculation will need to be prepared within 30 days, which will mean that full up to date records will need to be available at that time. A reasonable estimate of the person’s expected income for the year will also be needed so that the correct CGT rate can be applied along with details of their available unused annual exemption and any unused capital losses. As well as the compliance difficulties, this will also have significant cash flow impacts for sellers who previously had between 10-22 months to pay any CGT due.
If a UK resident sells a property abroad and makes a capital gain on it, they should put the information in their Self-Assessment return as normal. If they prefer they can pay the CGT due using HMRC’s Real Time Capital Gains Tax Service however they will also still need to put the details on Self Assessment. In this case the 30 day rule does not apply.
Non-UK residents must continue to report sales or disposals of interests in UK property or land regardless of whether there is a CGT liability, within 30 days of completion of the disposal. This includes disposals of residential properties, non-residential properties, and indirect disposals. From 6 April 2020, there is no longer an option to defer payment of CGT via a Self-Assessment return (as there was previously), and any tax owed must be paid within the 30-day reporting and payment period. From 6 April 2020 non-UK residents will be able to use the new online service, which will replace the current reporting service.
This blog has outlined the changes that have now been implemented regarding Capital Gains Tax reporting. FKGB Accounting are happy to assist with ensuring reporting compliance so please contact us with any questions.
