In April 2020, HMRC introduced a 30-day reporting requirement for disposals of a UK-situated residential property. The same time limit applies to paying any CGT due. Despite the new rules having been in place for a year, there is still confusion of when you should report, how and when you should pay any tax. So, to simplify as far as humanely possible:
If you dispose of the whole or just an interest in a residential property you may need to report it to HMRC. Residential property includes not only the actual structure but also land, grounds, and ancillary buildings to the main residence. These rules equally apply in some circumstances to trustees and executors as well as ordinary taxpayers (though their affairs are particularly complex and specialist advice should always be sought). For these purposes, a disposal includes sale, gift, exchange, or compulsory purchase amongst others. For simplicity, all ways of disposing of the property are called sales of the remainder of this article.
Firstly, if you are not UK resident when you dispose of a UK situated property, you are required to report the disposal within 30 days of the completion of the transaction. This is always the case, no matter the tax position and applies to all UK land, not just residential property.
Now it starts to get more complicated. If you dispose of a UK residential property and you are living in the UK at the time of disposal, you must report the disposal:
If there is any capital gains tax (CGT) due, you must report within 30 days of the completion of the sale using the HMRC online reporting system. If you are prevented from using the online system, paper versions are available by arrangement from HMRC.
Note – if you file an annual Self-Assessment Tax Return, you must also report the disposal in your Return for that tax year.
If no CGT is due on the sale because any capital gain is completely covered by the main residence relief for CGT (e.g.: this was your only home with no business use and garden size within the permitted area) or it is an inter-spouse transfer, there is no 30-day requirement to report. These are the most common occurrences for individuals.
If there is no CGT on the sale due to other reliefs (such as the gain is covered by your annual CGT exemption, capital losses or other CGT reliefs) the sale must be declared in your annual Self-Assessment Tax Return. If you do not file an annual Self-Assessment Return you can either register for Self-Assessment (to declare the disposal) or report using the HMRC “real-time” reporting service at any time between the date of disposal and 31 December following the tax year in which the gain was made.
Any capital gains tax due is payable within the same 30-day timeframe for reporting. The CGT liability will be partly based on your expected income for the tax year. If your taxable income is not as expected, you may need to either file a revised CGT Report online or claim a refund of overpaid tax through your Self-Assessment Tax Return.
For clarity, the date of disposal is determined by the date that you exchange contracts. The 30-day reporting timeframe is triggered by the date of completion.
If you file annual Self-Assessment Tax Returns and are fast enough to file your Return within 30 days of the completion of the sale, you are allowed to waive the 30-day requirement under the online CGT Reporting system under a) above, but this concession is likely to apply to only a limited number of taxpayers whose affairs can be concluded very quickly after the end of the tax year. These individuals are also allowed to settle their CGT liabilities under the usual Self-Assessment rules.
If in doubt, take professional advice as HMRC will issue fines if you are late.