Since the introduction of self assessment back in 1997, UK resident individuals have been required to report disposals of property on their annual tax return and pay over any capital gains tax (CGT) due by 31 January following the end of the tax year. A new regime was introduced in April 2020 which drastically shortened the window for both reporting such disposals, and paying over the CGT.
Who is affected?
A new 'UK land return' must be filed with HMRC within 60 days of a property disposal, with a payment on account of the CGT being made by the same date. The original deadline had been 30 days but this was extended in the Autumn Budget after various professional bodies calling for an extension to give taxpayers more time to deal with everything. The 30 day deadline still applies for any disposals which completed before 27 October 2021.
Non-UK resident individuals have been required to file similar returns on the disposal of UK residential property under these strict time limits since April 2015, but these rules were also extended from April 2019 to any disposal of UK land or property by a non-UK resident.
What needs to be filed?
The 60 day CGT return includes the same information regarding the capital gain that would normally be reflected within a self assessment tax return. A computation of the gain needs to be attached to the return and the return will need to be filed online.
No return is required if there is no CGT to pay, for example if the gain is covered in full by losses brought forward, main residence relief, or your annual exemption. In most cases a calculation will still need to be prepared to confirm that this is the case.
A separate return is required for each disposal, unless you have more than one disposal completing on the same day.
The new return is in addition to the existing tax return and so the disposal must be reported again when the individual completes their normal self assessment tax return at the end of the tax year. Taxpayers who don't otherwise need to file a self assessment tax return will no longer need to register just to report the gain.
Computing the gain
Capital gains is calculated in the normal way. However, in year reporting brings with it many complications, such as deciding which rate of CGT applies based on your expected income for the year, dealing with multiple disposals in the same tax year, utilisation of capital losses, and claiming relief which may not be quantifiable until after the event (such as an EIS investment).
What do I need to do?
If you are intending to sell a residential property it is essential that you get in touch with us as soon as possible so that we can ensure all the necessary information is available to file the return and calculate the CGT payable within the 60 day time frame. Late returns will incur penalties, and interest will be charged on late payment of any tax liability.
Now would be a good time to make sure the acquisition history, including any required valuations, and usage of your residential properties is documented to reduce the administrative burden on a future disposal when time is ticking.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
