We are seeing an increasing number of cases where individuals are unaware of the new reporting regime for capital gains on property disposals as it seems that estate agents and solicitors are failing to alert them to the new requirement.
What has changed?
The change came in on 6 April 2020 and means that where the disposal of a residential property results in a gain, this must be reported to HMRC within 30 days following the date of completion and the tax due must be paid over by the same date.
This is purely a timing difference, as the gain would otherwise have been reported on an annual tax return and the tax paid over to HMRC by 31 January following the tax year in which the disposal occurred. The law has not changed any of the rules in relation to which gains are taxable or the rate of tax that is payable. The only difference is that the deadline has been brought closer.
However, if the deadline for filing the capital gains tax UK property disposals return is missed, an automatic £100 penalty will be charged. Further penalties of £10 per day are applied if the return is still outstanding after three months.
What disposals are caught?
The new reporting regime catches any disposals of UK residential properties that result in a gain. Therefore, disposals of overseas residential properties are not caught (although there may be requirements in the overseas jurisdiction) and neither are UK residential property disposals that result in a loss. Instead, these disposals are to be reported on an annual tax return as normal.
This also means that if the gain is fully covered by a capital gains tax relief, it is not caught. An example of this might be a disposal of an individual’s main home, which is fully covered by principal private residence relief.
However, it would apply to the disposal of a UK second home or a UK-let property, whether or not an individual lived in that property at some point.
It is important to understand that the rules do not just apply to sales of property, they apply equally if someone were to gift a property (e.g. to an adult child) even though no money may have been received in exchange.
What should you do?
If you have disposed of a property which is caught by these rules and have not submitted the necessary filings to HMRC, please contact us immediately so we can help resolve this matter for you.
If you are in the process of disposing of a property or considering this, then as the deadline is tight, please do let us know so that we can ensure that all of the information can be gathered in time to ensure that any reporting requirements are met.