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Property briefing - December 2019

IN FOCUS: Changes from April 2020

In this month’s briefing, Suzanne O’Hara details an upcoming change to the CGT pay and file requirements, which reduces the deadline to 30 days from the date of sale of residential property by UK resident individuals.

This important change comes into effect from 6 April 2020, but many private individuals are unlikely to be aware of the implications. In many cases, Conveyancers will be the first point of contact in relation to the sale of residential property and their clients may not inform their accountants of said disposal until it is time to submit their tax return (or, indeed, may not even have an accountant). It will be important to make clients aware of this in order to mitigate any penalties.

In this regard, solicitors may wish to review their engagement terms to ensure their services are appropriately reflected.

Current position

  • When a UK resident individual disposes of any chargeable asset, they must declare any gain and pay the associated CGT by the 31 January following the end of the tax year in which the disposal occurred, i.e. if an individual disposes of an asset on September 2018 (2018/19 tax year), they must file a return and pay the tax by 31 January 2020. Therefore, this provides the individual a window of between 10 months and 22 months after the date of sale to pay their tax.
  • From 6 April 2015, Non-UK residents who dispose of UK residential property have been required to submit a return and pay the associated CGT within 30 days of the date of disposal.
  • From April 2019 Non-UK residents have been subject to UK tax on gains arising from direct or indirect disposals of all types of UK land and interests in UK property rich entities.

Position from April 2020

UK individuals will be required to report and pay the resultant CGT in respect of the disposal of UK residential property within 30 days of the disposal. This essentially strips out the initial computation of gain from the self-assessment system and makes it a standalone report and payment (although self-assessment taxpayers will continue to also report the gain on their tax returns).
  • No returns are required for no gain/no loss disposals and for disposals where no tax is due.
  • Returns may be amended, but only in respect of events that had already occurred at the date the return was delivered. For example, if a client makes a loss-making disposal after the date of the disposal of the residential property, an amendment cannot be made, and a refund must be obtained via the self-assessment tax return. The normal 12-month period is allowed for amending the return.
  • Enquiries into returns are covered by the normal enquiry rules. If a self-assessment return is subject to an enquiry, then any returns made under this legislation in relation to gains shown on that return are also deemed to be under enquiry.
  • Available capital losses can be offset if desired. Where there is more than one disposal in a year, the tax is calculated on the second disposal, taking into account the first disposal and deducting the tax paid at that time from the total amount due. This means that the cumulative amount of CGT due under these provisions is calculated each time a disposal is made, and the net tax due or overpaid is due for payment or refund.
  • Note that these are merely interim payments of CGT and the final calculation of the total CGT liability will be performed, as usual, through the self-assessment system (for the time being).

Practical issues

  • As noted above, no returns are required for no gain/no loss disposals (for example, transfers between spouses) and for disposals where no tax is due (for example, if full PPR is available).
  • However, listed below are some of the more common scenarios that a CGT liability may arise:
    • Gifts to connected parties
    • Sale of BTLs
    • Restricted PPR claims
    • Sale of inherited properties
As you can appreciate, the CGT calculations may be more complex in some scenarios and it may take a bit of time to gather the appropriate information. As a result, the introduction of the 30 day window is likely to bring with it some teething problems.

Our team of specialist tax advisers would be delighted to assist with this matter.