New reporting requirements for Capital Gains Tax (CGT) due by Individuals, Executors and Trustees on the disposal of UK residential properties are now in place.

The new rules can be quite complex depending on the circumstances and, already, we have helped many clients assess and report on their new CGT obligations. 

This is a fundamental change for those selling or gifting second homes or rental properties at a gain, or their main residence where this is not fully covered by principal private residence relief, as it requires completion of an online return and a payment on account of CGT within 30 days of completion of the transaction.

The date of completion for these purposes is the date the money/property changes hands, which differs to the usual CGT disposal date (being the date the contracts are signed). Reporting requires the completion of an online return using the Government gateway account via HMRC’s website.

Residential property can include dwellings, such as, holiday homes, rental properties or a house inherited. The history of land during the ownership period may also need to be considered if that land at any time was occupied or enjoyed with a dwelling as a garden or grounds. Care also needs to be taken if the property has only been occupied as a main residence for part of the period of ownership. In these circumstances, relief from CGT may not be available in full meaning there may be a requirement to submit a return and make a payment under the new reporting requirements.

For UK tax residents, if no CGT is due then the online return is not required. Care should be taken here to ensure the gain is calculated correctly.  

For non-UK tax residents, the rules also apply to the sale or disposal of UK non-residential property, and completion of the online CGT return applies in all cases regardless of whether there is tax payable or a loss arising.

The rate of CGT payable is determined by the estimated income for the tax year and relevant gains/losses up to the point of disposal. If CGT is due, this needs to be reported and paid within 30 calendar days from the date of completion of the transaction.

Penalties similar to those for self-assessment apply where the return is submitted late. These can include an automatic penalty of £100 if the return is not submitted by the 30-day deadline and further and more substantial penalties, at HMRC’s discretion, where the return continues to be late after 3 months, 6 months and 12 months. Late payment penalties and interest may apply if the CGT remains unpaid after the 30-day deadline.

Where a property is held in joint ownership, a separate return is required for each owner’s share in the property. 

If required to submit a self-assessment tax return for another reason, the gain also needs to be reported in the usual way via the self-assessment tax return with the CGT reporting reference included. 

We’re here to help

If you require any assistance with the completion of the return or are unsure of your reporting obligations, please get in touch with Nicola Sargeant, Wendy McKay, or your usual Johnston Carmichael contact.