Under the Radar: Residential Property Capital Gains Tax Filing Requirements

11 June 2020 | Paul Webster

From 6 April 2020, HMRC require anyone with a Capital Gains Tax (CGT) liability on UK residential property to file an online Return and pay the tax due within 30 days of the completion date. If your gain is covered in full by ‘Principal Private Residence’ relief, is within the £12,300 annual exempt amount or is a ‘no gain/no loss’ transfer between spouses, there is no reporting requirement.

With Brexit, Making Tax Digital and now the Covid-19 pandemic dominating headlines, it is easy how this new requirement could slip under the radar. With the penalties for late filing and payment being aligned with those chargeable under Self-Assessment, many taxpayers could find themselves racking up unexpected fines. Whilst HMRC have announced that no penalties will be charged for disposals up to 30 June 2020 because of Coronavirus, the lack of publicity and general awareness of this new requirement remains a genuine concern.

Another issue facing vendors is the time frame in which the gains need to be reported and the tax settled. Previously, an individual would have anywhere between 10 and 22 months in which to report the capital gain, depending at what point in the tax year contracts were exchanged. This provided ample time to attempt to calculate the tax due personally or appoint a qualified tax adviser to crunch the numbers and make the submission on your behalf. Now, even where a client appoints an adviser to assist them, they would still need to set up a ‘Government Gateway’ account, followed by a ‘Capital Gains on UK Property’ account. The adviser would then request authorisation by entering specific client related data, before generating a link that can then be sent to the client. The client then has a 14 day window in which to click on the link and approve the agent. This is on top of what can often be complex calculations especially where you have to make calls on whether past expenditure on the property was a repair or capital enhancement. Not exactly straightforward!

In many circumstances, the figures submitted will be estimates because there is simply not enough time to glean the information required. Even with the best will in the world, a computation may need to be revisited anyway because there are losses realised on other assets later in the tax year that could not have been envisaged at the time that the CGT Return was filed. HMRC have confirmed that any estimates can be adjusted by a revised submission online or through an individual’s tax return if they are within self-assessment. 

What happens with disposals of furnished holiday lettings? Unlike assured shorthold tenancies, these lettings use a completely different set of rules for CGT purposes and are more akin to trading rather than investment businesses. It is possible that the vendor may wish to claim one of the many reliefs available to them such as Gift Relief, Business Asset Disposal Relief (the new name for Entrepreneurs Relief) and Rollover Relief. Asking an unrepresented taxpayer with limited understanding of the tax legislation to provide a tax calculation where there are added complexities such as these and within such a short time frame seems to be a little optimistic.

With the removal of Lettings Relief in all but the most narrow of circumstances, the reduction in the final additional period of PPR from 18 to 9 months (it is worth noting that the Chartered Institute of Taxation have asked for a postponement due to the Covid-19 pandemic) and the complete withdrawal of higher and additional rate relief for mortgage interest, the perceived onslaught against buy to let landlords continues. Now to add insult to injury, there is the increased burden of having to file online and pay the tax within 30 days.

When will it end!

If you are in the process of selling a property or are planning to in the near future, please contact our Head of Private Client Tax, Paul Webster on PWebster@wheelhouse-advisors.com.

Back to articles

Subscribe for all the latest news