Changes to the reporting of disposals of UK residential properties from 6 April 2020

From 6 April 2020 certain disposals of UK residential properties must be reported with any capital gains tax due being paid within 30 days.

 

Changes in relation to reporting a taxable disposal of UK residential properties, as well as capital gains tax (CGT) arising from such a disposal, came into effect from 6 April 2020.

The changes affect UK resident individuals and trustees disposing of UK residential properties. Non-UK residents already had a requirement to report the disposal of such property. The new rules do not apply to transactions involving non-UK property.

Previously, the disposal of any kind of property (including UK residential property), was reported on the annual self-assessment return. With effect from 6 April 2020, disposals of UK residential property need to be reported within 30 days with any CGT due also payable by this date. The 30 day count starts from the date of completion (not from the date of exchange of contracts).

Not every disposal of UK residential property needs to be reported under the new rules. Only transactions which give rise to a chargeable gain and result in a CGT liability need to be disclosed. Accordingly, disposals where no CGT is due (i.e. those which qualify in full for principal private residence relief, fall within the CGT annual exemption, inter-spousal transfers and transfers resulting in a capital loss) are excluded from the 30 day reporting rules.

When computing the taxable gain, only capital losses which have already been realised can be deducted (i.e. any predicted or anticipated losses that will arise at a later date are ignored). Relief for such losses may be claimed via the self-assessment return (subject to the normal CGT loss relief rules).

Given the 30 day reporting deadline, the information required to compute the gain may not be available in full. Therefore, the legislation provides for use of the best available estimates. The CGT return may then be amended within 12 months, if required.

As the CGT return is separate from the self-assessment return, the same disposal may be reported on two returns. The CGT paid under the new rules is treated as a payment on account against the final self-assessment liability.

The CGT return will need to be completed online, using a dedicated HMRC service. Agents will also be able to submit the returns on behalf of the taxpayers, provided appropriate steps are taken to complete the agent authorisation.

If the 30 day deadline is missed, late filing penalties will apply. However, HMRC have indicated that there will be a grace period relieving any late filing penalties for returns of disposals occurring in the period 6 April to 30 June 2020, provided the return is filed by 31 July 2020. Interest will always be charged on any tax paid after the 30 day deadline.

For individuals leaving or arriving in the UK part way through the tax year, the disposal of the property will be reportable if it falls within the UK resident part of the tax year.

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