As of 6 April 2020, any UK resident who disposes a residential property that gives rise to a capital gains tax (CGT) liability must make an online return to HMRC and pay any tax due within 30 days of the completion of the disposal (now extended to 31st July 2020 as below).
Under the pre-existing rules, the requirement in relation to such a disposal is to notify HMRC in the usual Self-Assessment form, which must be filed and (any capital gains tax liability paid) by 31 January following the year of disposal.
The new 30-day deadline means there will be less time to calculate the CGT, report the gain and pay the tax.
Additionally, as the return must be completed online, the taxpayer will need to have created a Government Gateway account to either submit the return themselves or to digitally authorise a tax agent to do it for them.
Selling or disposing of a residential property that gives rise to a taxable gain will fall within the new 30-day deadline if both the exchange and the completion take place on or after 6 April 2020.
Where exchange has taken place on an unconditional contract prior to 6th April 2020 the disposal will fall within the existing rules and there will be no requirement to comply with the new “30-day deadline” even where completion is after 5th April.
As there are penalties (and interest on late paid tax) for failing to make the return and pay the tax within 30 days, we would encourage anyone contemplating a disposal of any residential property to let us know as soon as possible in order that steps can be taken to ensure that the deadline can be complied with. If no action is taken until after completion it may prove difficult in some situations to open a new Government Gateway account, obtain valuations, establish base costs, appoint the Tax Agent and submit the return within 30 days.
Although this is most likely to impact those selling let properties or second homes, it could also catch those selling their main residence if Main Residence Relief does not cover the entirety of the gain.
To help those selling properties familiarise themselves with the change in the rules and a new online process, HMRC is allowing a period of time to adjust and will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020.
For UK residents, this means transactions completed between 6 April and 30 June 2020 and reported up to 31 July 2020. Transactions completed from 1 July 2020 onwards will receive a late filing penalty if they are not reported within 30 calendar days.
Interest will accrue if the tax remains unpaid after 30 days.