From 6 April 2020 the way in which UK residential property sales are reported to HM Revenue & Customs will change dramatically. Those disposing of property need to be aware of the new reporting requirements, which come with a short deadline and payment date, together with changes to how any capital gain arising is calculated. Price Bailey’s advice to any residential property owners who are either in the process or planning to sell their property(s) is to seek immediate advice to understand how these requirements will affect you.
Since April 2015, non-resident individuals and other entities have been required to complete a Non-Resident Capital Gains Tax (NRCGT) return within 30 days of selling UK residential property. From 6 April 2020 this regime is extended to the sale of all UK residential property, subject to a small number of exceptions. Therefore, a much wider group of taxpayers will be required to comply with this tight submission deadline, which also sees the introduction of a payment on account of any capital gains tax arising.
How property sales are affected which are due to complete pre and post the new rules
For property sales which exchange on or after 6 April 2020, the transaction must be reported to HMRC by the person making the disposal using a new tax return. The deadline for this return is 30 days following completion of the property sale. Note that if contracts on the property sale are exchanged before 6 April 2020, the disposal is regarded as having taken place before the introduction of these new rules.
This new system of reporting is in addition to the existing Self-Assessment tax return regime, which is unchanged. Therefore a disposer who already completes an annual tax return will find themselves reporting the same property disposal to HMRC on more than one occasion.
Penalties for late filing
If disclosure is not made to HMRC within 30 days of completion, late filing penalties will be charged. The penalty can reach £1,600 per return, if filed more than 12 months late. HMRC will also charge interest if the tax is not paid on time.
Taxpayers are advised to ensure that they involve their accountant or tax adviser as early as possible when undertaking a significant transaction such as this to ensure they are made aware of the reporting requirements and so that they may understand and plan any tax payments due.
This post was written by Michael Morter, a tax specialist at Price Bailey. If you would like to know more about anything discussed in this post then please contact Michael using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.