A new 30 day requirement to file a return and to pay any capital gains tax owing on the sale of property in the UK has now commenced, with penalties and interest payable if the requirements are not met.
When a residential property in the UK is sold and the exchange and the completion dates are on or after the 6th of April 2020 the vendor must file an online return of any taxable gain arising and pay any CGT due, both within 30 days of the date the sale completes.
Before the 6th of April 2020 only non-UK residents were required to file a return – the Non Resident CGT return.
Non-UK residents who sell a residential property in the UK are therefore now required to pay any UK capital gains tax owing within 30 days of the sale completing, as well as lodging a return with HMRC.
A tax agent for the vendor – such as bdh Tax – can act on the vendor’s behalf when submitting the CGT return.
Where the required return is not filed within 30 days of the completion date automatic late filing penalties apply, which mirror those attaching to the UK’s self assessment tax return regime:
- £100 will apply initially.
- If the return is more than three months late daily penalties apply.
- Followed by fixed £300 penalties at 6 months and 9 months.
Late payments and underpayments of this notional CGT will attract interest.
So taxpayers can become familiar with the new system HMRC has not issued penalties for late returns that were submitted up to 31st July 2020 for disposals of property up to 30th June 2020.
If a property sale completes on or after the 1st of July 2020 the CGT on UK property return must be filed within 30 days and the CGT must be paid within 30 days – failing which the penalties and interest noted above arise.
Clearly the disposal is taking place during a tax year, so when computing the tax payable the taxpayer must make a reasonable estimate of the CGT payable as if the tax year ended on the date of disposal.
So, the taxpayer will need to estimate taxable income for the year to work out if the gain falls wholly or partly in the basic rate band – when the CGT is due at 18% – or at 28%.
Where an estimate changes an amended return can be filed which corrects the estimate.
The taxpayer’s self-assessment tax return for the year of the property sale will include all disposals arising during the tax year, in the usual way.
Remember that this provision only applies to the sale of UK residential property. CGT on the disposal of other assets will continue to be due for payment on the 31st of January following the end of the tax year.
bdh Tax is experienced in the preparation of capital gains tax computations. We have been preparing and lodging Non Resident CGT returns for non-UK resident clients who are selling UK residential property for many years.
Please complete the enquiry form on this web page if you are selling – or are considering selling – a residential property in the UK and would like a free initial chat about your plans and how we can help with your tax planning and tax returns.