On 6 April, the administration of Capital Gains Tax (CGT) on sales or other disposals of UK residential property changed dramatically.
From this date, where a taxable gain is made on the sale or disposal of a UK residential property, a residential property return and a payment on account of CGT must be made within 30 days of ‘completion’ of the disposal.
Where completion takes place in the conventional manner, for example, by way of a binding contract on the sale of a house, then the need to adhere to the new CGT payment terms is unlikely to go unnoticed by the professional handling the sale.
Now, consider a disposal that occurs with no contract in place – i.e. gifts to children or trusts or declarations of beneficial ownership under a trust deed; these ‘deemed disposals’ are more common than you might think and are not exempt from the change in CGT rules.
In these instances, ‘completion’ is deemed to occur at the time of the disposal or deemed disposal; consequently, the 30-day period for filing and payment of tax due starts at that date i.e. earlier than you might think.
It’s worth bearing in mind that if you are UK-resident, you do not need to file a 30-day return if no tax is due on the disposal.
There are some exclusions to the new rules, albeit limited. You can read more about these on the Gov.uk website.
Taxation Partner, Barry Jefferd, comments: “We recognise that tax planning might not be high on your agenda at present, but it remains as important as ever.
“Worth considering at present, is the fact that some asset values are likely to be heavily depressed and so gifting assets, transferring assets or creating trusts could suddenly be a lot more affordable.”
Temporary leniency on payment terms in response to Coronavirus
According to an HMRC question and answer factsheet, shared with ICAEW’s Tax Faculty, there is a temporary easement to the CGT 30-day payment terms, intended to help those struggling to report CGT or contact agents during the COVID-19 pandemic.
HMRC stated: “To help those selling properties familiarise themselves with the change in the rules and a new on-line process, HMRC is allowing a period to adjust and will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020.
“For UK residents, this means transactions completed between 6 April and 30 June 2020 and reported up to 31 July 2020. Transactions completed from 1 July 2020 onwards will receive a late filing penalty if they are not reported within 30 calendar days. Interest will accrue if the tax remains unpaid after 30 days.”
Whilst the charging of late penalties has been postponed temporarily interest will still run on the CGT due, so filing and paying as soon as possible is still highly recommended where possible.
How can George Hay help?
Capital Gains Tax often involves a large tax charge and so undertaking careful tax planning can be essential if you are to minimise the tax that you pay.
Going forward, those disposing of property or proceeding with other ‘deemed disposals’ will have to be organised, in order to meet the 30-day cut off and avoid incurring penalties.
If an accountant or adviser looks after your tax affairs, notify them of your intent to dispose of property at the earliest opportunity.
To discuss your circumstances in more detail with one of our expert team, contact us today.