With restrictions gradually being eased off watch out on property disposals
New capital gains rules for residential properties, including buy-to-let from 6 April 2020
From 6 April 2020, residential property sales ( as the main residence is exempt, this leaves a buy-to let [BLT] and second house) must be reported to HMRC and the CAPITAL GAINS tax paid within 60 days of completion.
Sales covered by the only or main residence exemption do not have to be reported.
A separate return is required for each property sold unless two disposals occur on the same day.
HMRC is setting up a new system for the administration and tax collection and late filing penalties will apply and this is based on penalties for self-assessment.
This new regime aligns the UK residents with non-resident individuals disposing of UK based property. The non-resident disposal rules started in March 2015.
Finance Act 2019, Sch 2 requires that all disposals of UK residential property on or after 6 April 2020 by UK-resident taxpayers must be reported to HMRC within 30 days of completion if they generate a tax liability. Properties which benefit from principal private residence relief do not have to be reported.
Reporting responsibilities/ parties
UK residents that are affected:
A gain which is fully covered by annual exemption does not have to be reported.
Reporting to HMRC
The tax and the 30 day return are regarded as a declaration and payment on account.
A self-assessment return is required to be filed as well. The tax has to be computed with all relevant information as if it is a final capital gains tax computation.
Unless a capital loss has been reported it cannot be used for a set-off when making the return. The taxpayer will however be able to claim losses realised in the tax year in their self-assessment tax return.
The default position is for the annual exempt amount to be set against the residential property gain first. This applies when the taxpayer has other disposals in the year, for non- residential properties.
The taxpayers will have to estimate whether he/she will be a basic rate or higher rate taxpayer. The capital gains tax will be at 18%/28% for residential property disposals. HMRC allows a period up to the self-assessment return deadline to amend the capital gains tax return (FA 2019, Sch 2 para 19(3)).
Government Gateway Registration
If a taxpayer does not have a government gateway account, it would be advisable to register as soon as possible as the 30-day reporting and payment timeframe does not allow a grace period for taxpayers to register.
A return is required by each individual owner for a property. So where there are multiple owners , multiple returns will have to be submitted, in a case where a property is owned as tenants in common.
The tax penalty regime will be the same as for standard self assessment without the £10 daily filing penalties:
Interest will also accrue on late payments.
A client disposing of a taxable dwelling will have to start collating information as soon as the property is put up for sale and continue to do so while going through the conveyancing. The Accountant should be notified of the impending disposal.
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