Changes to Capital Gains Tax reporting on Residential Properties

With recent changes being made to Capital Gains Tax (CGT) reporting on residential properties, Donna McCreadie from Perrys Chartered Accountants outlines the important information you should be aware of.

Capital Gains Tax (CGT) is a tax on the profit when you sell an asset, such as a property, that’s increased in value. Where a Capital Gains Tax liability exists on the disposal of a residential property, the liability is currently declared on a self-assessment tax return, with payment of the tax being due by 31st January following the tax year in which the disposal takes place.

However, for disposals from 6 April 2020, individuals will need to submit a CGT return to HMRC within 30 days of completion, and make a payment of the CGT liability within the same timeframe. Failure to pay on time will result in potential penalties and interest being charged by HMRC.

The new regime mirrors the current reporting requirements for non-resident individuals, which were introduced in April 2015, and will affect those disposing of rental properties, second homes and gains which are not covered by the annual exemption or unused losses.

Reporting will not be required for disposals of main residences where the entire gain is covered by Private Residence Relief (PRR), but will apply where only partial PRR is available.

The new reporting procedures also apply where no money has changed hands, for example when a property is gifted to a family member or transferred into a Trust.

Reasonable estimates are permitted in respect of valuations needed to calculate the gain, if it is not possible to obtain actual figures within the 30-day window.

The new regime will undoubtedly add pressure to CGT reporting for individuals, especially in cases which involve complex CGT calculations, as well as accelerating the CGT payment from a maximum 21-month window to 30 days following completion.

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