HM Revenue & Customs (HMRC) has, to date, issued thousands of late filing penalties in respect of the new 30-day reporting and payment window for Capital Gains Tax (CGT).
From 6 April 2020, UK residents disposing of residential property that is not a main home must report any chargeable gains (not covered by losses or the Annual Exempt Amount) made and pay the CGT due within 30 days from the date of completion.
Importantly, when considering whether your Annual Exempt Amount has been utilised in full, you should take into account any other gains you have made from disposal of other chargeable assets, not just property.
Whilst penalties are being issued for late filing, HMRC will not be issuing penalties for late payment until after 31 January 2022.
If you feel that you have a reasonable excuse for late filing or payment, this should be communicated to HMRC. However, appeals will be dealt with on a case-by-case basis and there is no guarantee that HMRC will accept your reasoning as grounds to withdraw any penalty.
Reporting and paying CGT within 30-day window
Landlords and second homeowners within scope of the new rules must report chargeable gains via a Capital Gains Tax on UK property account, within 30 days of the completion of the transaction. If no tax is payable, a return does not need to be submitted.
Where a taxable gain has been reported, the CGT liability must then be calculated and settled within the same 30-day window.
Gains will still also be reported via the self-assessment system, in addition to the standalone CGT on UK Property return.
CGT 30-day rule: What’s the impact?
Previously, taxpayers had at least 12 months to report chargeable gains via their annual self-assessment tax return, and so longer to prepare to settle whatever liability arose.
Now, taxpayers will need to calculate their liability quickly – taking into account the Annual Exempt Amount – and, for all intents and purposes, make a supposition about which CGT rate to apply (18 per cent, or 28 per cent). The payment made is deemed a ‘payment on account’.
In some instances, this could result in CGT being overpaid. Once the ‘true’ liability is calculated upon submission of a Self-Assessment Tax Return, some landlords and second homeowners may, as a result, find that they are due a repayment.
Most recently, a report by the Office of Tax Simplification (OTS) deems the 30-day deadline too ambitious and recommends extending it to 60 days.
How can George Hay help?
In the event of a planned disposal, we would encourage you to notify an adviser at the earliest possible opportunity so that the relevant information can be gathered in good time, and deadlines met.
We can work alongside your chosen conveyancer to ensure that you are compliant with all of HMRCs requirements, upon the disposal of UK residential property.
If you are concerned about how the new rules could impact you, or you would like to discuss how we can support you with the submission of a CGT on UK Property return, please call 01480 426500, or fill in one of our online enquiry forms.