Reporting and payment of capital gains tax on UK property disposals
A disposal of a property will be liable to Capital Gains Tax if the property is sold, gifted or transferred to someone else, other than your spouse or civil partner.
UK residents are required to report any Capital Gains Tax liability and pay any Capital Gains Tax due within 60 days of the completion of the sale where there is a liability to Capital Gains Tax.
The report and payment must be made using HMRC’s digital UK Property Service.
The sale will also then need to be declared on your Self Assessment tax return if one is required.
For a ‘one-off’ disposal, there may be no need to register for Self Assessment and submit a Self Assessment tax return. The report and payment of Capital Gains Tax can be made through the new service.
If there is no tax to pay i.e. a loss is made or the gain is covered by annual exemption allowance or other relief, then no report will be required.
Non-residents who dispose of a property (whether it is residential or not) must report disposals and pay any tax to HMRC within 60 days of the completion of the sale. Unlike UK residents, all disposals must be reported within 60 days whether there is tax to pay or not.
How to report
To use the service individuals will need to register for the new digital service if they intend to make the report themselves and not use an agent. Individuals wishing to use an agent to make the report will need to set up a Capital Gains Tax account with HMRC and provide their agents with a CGT reference.
Disposal and completion dates
The date that contracts are exchanged on the sale of a property is the date of disposal. It is that date that will determine the tax year in which the gain occurs. The completion date is normally the date that the proceeds are received and the keys are handed over to the new owner which will determine the start of the 60 day period for reporting and paying Capital Gains Tax.
If the report is not made or the tax is not paid within the 60 day period then late filing penalties and interest will be applied in a similar way to that of self assessment i.e. £100 automatic late filing penalty with further penalties applied after 6 months and 12 months for non-filing and interest on late payment of tax.
If actual figures are not available when making the report to HMRC then estimated figures can be used rather than delaying making the report after 60 days. The individual has 12 months to go back and amend the return when actual figures are available. Alternatively, they may choose to amend the figures on their self assessment return, if they are required to submit one.
If multiple disposals are made within the same tax year, then a separate return must be made for each property unless exchange of contracts and completion occur on the same date. A loss made on a previous disposal can be included within the calculation for Capital Gains Tax so long as the loss was reported to HMRC.
If a gain has been made on an earlier disposal and CGT paid to HRMC within 60 days, then a repayment can be claimed through the new service if a loss is made on a subsequent disposal or if expected income for the tax year is considerably lower and the higher rate of tax has been used in the original calculation.
Frequently asked questions
Q: How do individual customers access the new CGT service?
A: Individuals register and subscribe to the service via Gov.UK.
Q: Are you, as my Agents, able to access the new CGT service on my behalf?
A: Yes, an Agent must be registered with the existing HMRC Agent Service and create an Agent-Client relationship. The client can electronically authorise the Agent to act on their behalf.
Q: How, and by when, do I pay the CGT charge?
A: You will need to report the disposal and pay any CGT due within 60 days of the completion of the disposal. Reporting and payment will be made electronically. Customers will report using the new online CGT Payment on Property Disposal system. Further information is available on gov.uk. For digitally excluded customers offline reporting will be possible. Further information on offline reporting will also follow in due course.
Q: Will I incur a late filing penalty if I file my CGT Payment on Property Disposal return late?
A: Yes, the penalties for CGT Payment on Property Disposal returns are calculated in the same way as Self Assessment under Schedule 55 of the Finance Act 2009, apart from daily penalties (which aren’t charged for CGT Payment on Property Disposal returns). The filing deadline for a CGT Payment on Property Disposal return is within 60 days of the completion of the sale. If a return is filed more than 60 days following the completion of the sale it is late and attracts a late filing penalty of £100. Returns filed more than 6 months after completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher. Returns filed more than 12 months after the completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher.
Q: If the gain is calculated as being below the individual personal allowance, do I still have an obligation to report to HMRC?
A: If the gain is below the annual exempt amount or is covered by Private Residence Relief, there is no obligation to report the disposal if you are resident in the UK. If you are non-resident then you still have to report the gain even if it is below the annual exemption.
Q: If someone wasn’t non-resident at time of sale but became non-resident during the tax year do these rules apply?
A: Non-residents must also report the disposal of UK residential property interests within 60 days of the date of completion of the disposal and pay any capital gains tax that is due.
Q: If an individual is not in Self Assessment and sells a property, how long does it take to register for the new Digital service?
A: Registration can be completed in minutes.
Q: Do all clients need a UTR in order to submit a CGT on UK Property Return?
A: A UTR is one of several identifiers that can be used to report and pay CGT.
Q: Do the new rules apply to gifts?
A: Yes, the new rules apply to gifts of UK residential property.
Q: I thought the law would also cover the disposal of non-UK residential property by a UK resident?
A: No, the new rules only cover the disposal of UK residential property interests. The disposal of a non-UK property that gives rise to a capital gain for the individual, will need to be declared via Self Assessment.
Q: Will I be given a reference to make the payment under?
A: Yes, customers will be given a payment reference number once they have submitted their CGT Return.
Q: Will the CGT Liability be paid in the same way as Self Assessment through a UTR?
A: Customers will be required to pay using a payment reference number once they have submitted their CGT Return. The CGT reference is separate to the UTR.
Q: How do you obtain a CGT reference?
A: By registering for a CGT account via Gov.UK.
Q: What happens if someone doesn’t have an online bank account?
A: There are several ways for customers to make payment, including through non electronic means.
Q: Will the CGT paid on account show on my Self Assessment account?
A: The Self-Assessment online should be updated to include reference to CGT payment on account.
Q: How does this affect disposals of a whole property where part of it has been let i.e. annexe or flat within the main residence?
A: The disposal will need to be reported within 60 days of the completion of the conveyance.
Q: Can you partially complete a declaration and return to it a day or two later with the final information?
A: Yes, save and retrieve functionality will be available to allow taxpayers to return to a part completed Return that has not yet been submitted to HMRC.
Q: What should I do if I do not have the final figures ready to make the report within the 60 day deadline?
A: Do not delay in making your report. You can use estimated figures to ensure you report within 60 days and then amend the figures when you have final figures available. The amendment can either be done via the new digital service or on your Self Assessment form, if you are required to submit one.
Q: Can you use the annual exempt amount against a residential property gain even if you know you will make other disposals to be reported on the tax return during the tax year?
A: The calculation of the amount of tax notionally chargeable ignores disposals which have a later completion date. In this case the annual exempt amount would have to be used against the residential property gain – ignoring the later disposal.
Q: Are the rules to do with the disposal of land as well as residential property?
A: For UK residents these rules are for direct disposals of UK land on which a residential property gain accrues. If the disposal is of land that is not classed as residential property, then these rules do not apply and any gain will need to be declared via Self Assessment (the definition of residential property is at Schedule B1 Taxation of Chargeable Gains Act 1992). For non UK residents, all disposals of land and buildings must be reported within 60 days of completion.
Q: How do Trusts access the new CGT service?
A: A Trustee will register and subscribe to the service using the Trust UTR no. If the Trust is not yet registered, the Trustee must register the Trust with the TRS (Trust Registration Service) and use a Temporary Reference Number, which will be provided once registration complete to register and subscribe to the CGT PPD service whilst they wait for the Trust UTR no.
Q: Do these new rules apply to periods of administration in deceased estates?
A: Yes, the new rules apply to personal representatives.
© Thandi Nicholls Ltd 2023 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, S S Thandi and M S Bains cannot be held responsible for the consequences of any action or the consequences of deciding not to act.
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