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Changes to Capital Gains Tax

Mike Wakeford

Currently a capital gain that is made by an individual UK resident is reported through the self-assessment tax return regime. This means that if an individual disposes of a property during the year ended 5 April 2019, it will be notified on the individuals 2018-19 tax return, which does  not need to be submitted until January 31, 2020 with the tax due on that same day. 

It means that under the current system, it can be anywhere between 10 and almost 22 months from the date the gain is made until the capital gains tax (CGT) is returned and settled. 

The government’s plan is that within 30 days of the disposal of a residential property, the beneficial owners have to prepare a provisional CGT return and make a provisional payment on account for the CGT ultimately to be due. This already applies to non-UK residents, but is going to be extended to all taxpayers.  

This new return is in addition to the existing CGT aspects of self assessment, which this means that taxpayers will still be required to fill in the normal CGT pages within their self assessment tax returns and then pay any outstanding CGT not covered by the provisional payment already made by January 31 after the tax year in question.

These changes will apply for disposals made on or after 6 April 2020, leaving just over a year before the changes come in. 

The reason behind reporting the same thing twice is because every tax year is dealt with in isolation and it is not until the end of the year that it is possible to truly aggregate all income, gains, deductions, and reliefs to formulate a properly reconciled and final tax position. 

There are exemptions to provisional reporting where there is no CGT to pay such as: 
1)    When there is a no gain/no loss transaction that happens between spouses and civil partners
2)    Where the gain is covered by private residence relief
3)    Where any losses or annual exemption are sufficient to cover the gain 

There are also other imperfections in the proposed new system, such as there is no facility to reduce CGT payments on account (that is, get some of the provisional CGT back) if the taxpayer makes a capital loss later in the same tax year in which a residential capital gain has previously arisen. 

If you have any questions regarding CGT please contact your local Moore office.