It’s now been over 3 years since HMRC introduced the new reporting requirements for Capital Gains Tax (CGT) on the disposal of certain residential property. As tax is ever changing, we have provided an up-to-date summary of all the information you’ll need to know when making a submission to HMRC.
Individuals, whether UK tax resident or non-UK tax resident, who make capital gains on residential properties on or after 6 April 2020 are liable to use this new reporting system. This includes the sale of:
When the rules were first introduced, the deadline was 30 days from sale completion, however following an announcement in the autumn budget in 2021, this was extended to 60-days from 27 October 2021.
A separate CGT return is not required if you are UK resident at the time of disposal and:
Note: Although you may not have to complete a 60-day CGT return if you fall into one of the criteria above, the disposal may still have to be declared on your annual self-assessment tax return.
The filing requirements for non-residents are greater than for UK residents. Non-UK tax residents have to file a separate declaration for all disposals of UK property to HMRC, even if there is no tax to pay or they have made a loss. This includes any disposals of residential or non-residential UK land and property, and indirect disposals of certain UK property.
It is therefore important to understand your residence position at the date of disposal.
The following information is required to make a return:
If government gateway credentials are held for a personal tax account, individuals will simply need to add the ‘Capital Gains Tax on UK property account’ service to their gateway. Agent authorisation requests can then be submitted which will allow your accountants to file the return on your behalf.
Individuals without a government gateway will need to create one first in order to access the system. Our previous blog provides a step by step guide on how to create an account.
Where the property disposed of was owned by more than one person, each owner must each set up a property account and report their share of the disposal.
Individuals who have a CGT liability and are obligated to report/pay tax on gains within 60 days, and are in self-assessment (SA), must also report the disposal within their SA return.
Individuals no longer need to register for self-assessment solely for the purpose of reporting a residential property disposal. This new system means that if you are reporting a ‘one off’ disposal and have no other reason to complete a tax return, you will not need to register for Self-Assessment.
Some individuals may not be able to use the online system and in such cases paper returns (Form PPDCGT) are accepted by HMRC. Paper returns can be requested by contacting HMRC, or they are currently available online. The availability of the forms online is currently under trial until September and may be withdrawn from this date.
After the paper return is then processed by HMRC, a manual tax charge is raised by HMRC and a letter is sent to both the taxpayer and the agent, advising them how to pay and the reference number to use. The taxpayer will then have 14 days from the date the charge is raised to pay any Capital Gains Tax owing.
HMRC have confirmed that the use of estimates is acceptable when completing your capital gains tax returns.
Estimates can be corrected by amending the property disposal return or alternatively through the end of year self-assessment tax return.
Specifically, the returns require an estimate of your income for the year to determine what rate of capital gains tax is payable, which can be difficult for certain taxpayers, particularly early on in the tax year.
HMRC have confirmed that, provided a reasonable estimate was used at the time and the estimates box is ticked on the return, any additional tax due that is attributable to the estimate will not attract late payment interest from the original 60-day payment deadline. Interest will, however, run as usual from 31 January following the tax year of disposal, on any unpaid Capital Gains Tax at that point.
If the estimates were unreasonable or the original return did not have the estimate box ticked, late payment interest, currently at 7.5% will start to accrue from the original 60-day deadline.
If an overpayment occurs due to an amendment or further UK Property Disposal return, you can request a repayment through the UK property Disposal online return. HMRC will review the record and repay any tax overpaid.
A repayment will not happen automatically. If a repayment is not requested, the tax overpaid will be offset against tax due on Self-Assessment.
If a repayment is not requested and a Self-Assessment return isn’t made, then any tax overpaid will remain as a credit on the Property Disposal account until contact is made to HMRC.
The UK Property Disposal system will not show an overpayment has occurred and will display a zero balance.
With late payment interest rapidly rising, understanding the reporting requirements on the sale of your residential property is crucial to avoid being penalised by HMRC.
If you would like assistance in filing your capital gains tax returns or on how to navigate these issues, please get in touch with our Tax Director David Portman (davidportman@lubbockfine.co.uk) or your usual Lubbock Fine contact.
