Changing times – changes to reporting times for property disposals
Helen Thornley, ATT Technical Officer, outlines some of the key changes to reporting requirements included within Finance Act 2019 which will affect both UK resident and non-UK resident individuals disposing of UK property.
A major change to the timing of Capital Gains Tax (CGT) payments for UK residents takes effect from 6 April 2020. Individuals disposing of residential property where a tax charge arises – most likely landlords and second home owners – will need to report the disposal and pay the CGT within 30 days of completion. Currently only non-residents are required to carry out such in-year reporting, and the obligations here have recently been extended to non-residential properties.
In-year returns for UK residents
The new provisions, which are included in Part 1 of TCGA 1992, require UK resident individuals disposing of a UK residential property from 6 April 2020 to calculate and report the tax due within 30 days of the completion of the transaction. A payment on account equal to the calculated tax bill must also be paid within the same window.
Where appropriate, reasonable estimates and apportionments can be made, which is likely to include an estimate of the applicable tax rates and could include taking a view on the individual’s likely residence for the year. There are also special rules when estimating the tax due for when losses on other property disposals and other assets can be taken into account. There are then limited provisions for amending the return in-year, with any final adjustments which are required likely to made through the usual self-assessment process.
Exemptions
Fortunately reporting will not be required when no payment on account is required – for example if private residence relief is available in full, the gain is under the annual exemption or one of the no-gain/no-loss provisions such as a transfer between spouses applies. Neither is a report required where the individual realises a loss, although they might choose to report if it would allow them to reclaim some or all of a payment on account made in respect of a residential disposal earlier in the same tax year.
Wider impacts
The new reporting requirements are being introduced at the same time as we are expecting changes to letting relief and private residence relief. These changes will both increase the number of people likely to pay CGT on a residential property disposal, and the amount of tax due.
The key requirement now is to ensure that clients are aware of the forthcoming changes and are prepared for both the significantly reduced reporting window and the cash flow consequences of the payment on account.
Non-residents – April 2019 changes
Non-resident individuals have been required to report disposals of residential property within 30 days since April 2015. From April 2019, this requirement has been extended to disposals by a non-resident of any UK land and now includes, for example, commercial property and farm land. Non-residents who hold UK property via companies or other structures must also now report indirect disposals of holdings in ‘property rich’ entities.
Finally, the option which some non-residents had to pay any tax along with the rest of their self-assessment tax bill was removed from April 2019. Non-residents must now both report and pay within 30 days even if they are already in self-assessment.
Helen Thornley will be presenting the session ‘Taxation of Property’ which forms part of the one day ICAS flagship course ‘Current Tax’. For details of the other sessions and booking details please view the course info below.