Where a UK resident individual, trustee, personal representative, or partner in a partnership disposes of UK residential property and capital gains tax is due, they are required to report any Capital Gains Tax liability and pay any Capital Gains Tax due, within 60 days of the completion of the sale where there is a liability to Capital Gains Tax.
Non-UK residents are required to report not just disposals of residential property, but all disposals of UK land whether or not they realise a gain, including indirect disposals such as the sale of shares in property rich companies. A company is property rich if 75% or more of its gross asset value derives from UK property.
For a ‘one-off’ disposal, there may be no need to register for Self-Assessment and submit a Self-Assessment tax return, however, for those meeting the requirements of Self-Assessment or who are already in the Self-Assessment system, the property disposal will also need to be reported on their personal Tax Return.
Applicable Transactions and Properties
Reporting, by UK residents, applies to the following disposals:
- A sale of UK property at arms-length
- A gift, transfer or deemed disposal
- A sale at undervalue
Types of Property
- A property never lived in, or only lived in for part of the ownership period, where not a main residence
- A holiday home
- A rental property
- A mixed residential and commercial property.
Payment on Account of Capital Gains Tax (CGT)
The actual capital gains tax liability will be computed once the taxpayer’s Tax Return has been prepared (if relevant). This will consider an individual’s taxable income for the year and losses realised after the property disposal, that were not reflected in the original tax estimate. The CGT paid is treated as a payment on account, and interest will be charged where the estimated tax payment is less than the actual CGT due.
To file the return, you will need to set up a Government Gateway account and create a ‘CGT on UK property’ account. A client can authorise an agent to file, such as Dixcart UK, the return on their behalf and there is a separate agent authorisation process.
Where the return is not filed within 60 days of the date of completion, an automatic late filing penalty of £100 will apply.
Returns filed more than 6 months after completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher. Returns filed more than 12 months after the completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher.
Where an individual is not in Self-Assessment, the return is treated as having been filed on 31 January following the year of assessment in which the disposal takes place.
This is in contrast to someone in Self-Assessment for whom the enquiry window ends 12 months after the submission of the Self-Assessment tax return.