insideKENT Magazine Issue 93 - December 2019 | Page 189

BUSINESS Changes to the reporting of disposals of residential property for UK Residents By Chris Ball, Senior Tax Practitioner at Wilkins Kennedy FROM THE 6 APRIL 2020 CHANGES TO THE WAY UK RESIDENT INDIVIDUALS, TRUSTEES AND PERSONAL REPRESENTATIVES REPORT THE DISPOSAL OF UK AND OVERSEAS RESIDENTIAL PROPERTY COME INTO EFFECT. Currently any UK resident individual, trustee or personal representative disposing of residential property is required to declare the disposal on a Self-Assessment Tax Return and pay any Capital Gains Tax (CGT) due, within 9 months following the end of the year in which the property is disposed of. From 6 April 2020, in a move to bring UK residents in line with non-UK resident individuals (and to collect tax much sooner), the disposal of residential property will need to be reported to HM Revenue and Customs within 30 days of sale. Gains realised on the disposal of property that has been both residential and non-residential are to be apportioned. The payment of any CGT due will also need to be made within the 30-day window. This new rule does not apply in all cases. Those whose capital gain is fully covered by Principal Private Residence Relief, brought forward losses or those that have been realised prior to this disposal, their annual exemption, or where a nil gain/nil loss arises, will not need to file a Return within 30 days and should report the disposal in the normal way via self-assessment where applicable. Relaxation of the rules also applies where an overseas property is disposed of in a country that has a Double Taxation CGT agreement with the UK, or where the individual will be taxed under the remittance basis. Failure to file the Return within the 30 days will result in a late filing penalty of £100 being charged. Where a Return is still outstanding at 6 and 12 months, penalties of £300 or 5% of the tax due, if greater, will also be charged. Any late payment of the CGT due will incur interest charges and a penalty equal to 5% of the tax outstanding. of the Return(s), and the payment of tax due, within the 30- day window. When calculating the CGT payable (for residential property gains the rate is normally 18% or 28% or a combination of both), losses available at the date of disposal and the annual CGT exemption can be used alongside a ‘reasonable estimate’ of the individual’s income for the tax year concerned. This is due to the fact that a disposal Return may have to be filed before the end of the tax year. The estimated tax due will be regarded as a ‘payment on account’, until the actual amount can be calculated and reported to HMRC via the Self- Assessment Return. Any tax overpaid can only be reclaimed once a Self-Assessment Return has been submitted. Local offices: Therefore, if you are planning on selling a residential property after 6 April 2020 careful consideration beforehand may be required to ensure that all relevant information can be gathered, CGT calculations, and the required Return(s) prepared to allow for the submission If you would like more information about this please get in touch: [email protected] Ashford: 01233 629 255 / Canterbury: 01227 454 861 Maidstone: 01622 690 666 / Orpington: 01689 827 505 Sandwich: 01304 249 997 [email protected] www.wilkinskennedy.com wilkinskennedy 189