FINANCE
BY RICK SCHOFIELD , PARTNER , AZETS
UK Residential Property Owners Need To Check Their Capital Gains Tax Liability – New 30-day Filing Requirement
BUYING OR SELLING A PROPERTY IS EXCITING AND , OF COURSE , A HUGE EVENT IN ANYONE ’ S LIFE . HOWEVER , FOR IT ALL TO GO SMOOTHLY , IT LITERALLY PAYS TO BE WELL-INFORMED . IT ’ S HARD TO BELIEVE THAT IT ’ S ALREADY A YEAR SINCE THE RULES CHANGED AROUND PAYING TAX ON RESIDENTIAL PROPERTIES .
We are finding that many people involved in property transactions simply aren ’ t aware of their obligations to pay any Capital Gains Tax ( CGT ) due within 30 days . This is backed up by figures from HMRC , who , in the last six months of 2020 received £ 1.3M in late filing penalties relating to this , suggesting that the requirement to submit a separate Capital Gains Tax UK Property Disposal Return ( CGT Return ) on residential properties to HMRC is still not widely known .
The new obligation applies to UK residential property transactions where the date of disposal , which is usually the date of exchange of the property , was on or after 6 April 2020 and where CGT is due . Where no tax is due , because of the many reliefs available for UK residents such as Principal Private Residence ( PPR ) Relief and the annual exempt amount , UK residents do not need to report transactions . However , non- UK residents continue to need to report transactions even when no tax is due .
HMRC deem UK residential property to include a dwelling with ancillary buildings and any residential elements of mixed units . As a result , where a landlord or homeowner sells a property ( including a residential element of any mixed units ) and there is some CGT to pay , they must file a separate CGT Return and pay any CGT due within 30 days from the sale completing . If the return is not submitted on time , a £ 100 late filing penalty applies with additional penalties accruing for continued delays . However , depending on the specific circumstances , a range of reliefs and exemptions may be available to minimise CGT .
According to national statistics published by HMRC , 640,140 residential property transactions took place in the second half of 2020 , which means at least 1 in every 48 property sales received a late filing penalty from HMRC .
There are many factors to consider in order to calculate and complete the CGT Return , including determining the time the property was deemed to be occupied as a main residence , and periods not qualifying for PPR Relief during periods of non-occupation , so it is important to start early . Capital gains is currently payable at 18 % and 28 % depending on the individual ’ s tax position . An accountant can help , including identifying the extent of garden and grounds qualifying for PPR Relief and capital losses and annual exemptions available which could be set against gains . There are also special tax rules around transfers on divorce , between family members , trusts , and deceased estates , and it ’ s also important to understand the reliefs available to owners who have moved out of their house to nursing homes .
For more information , including a copy of a flowchart which clarifies the steps to take regarding the above , contact taxmatters @ azets . co . uk .
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
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