UK readers who are anticipating the sale of a residential property on which a capital gains tax (CGT) charge may apply would be advised to consider the changes to the reporting and payment of this CGT charge from 6 April 2020.
The general rule will be that for relevant disposals on or after this date (6 April 2020) a return in respect of the disposal must be delivered to HMRC within a ‘payment window’ of 30 days following the completion of the disposal, and a payment on account made at the same time. The self-assessed calculation of the amount payable on account takes will take into consideration unused losses and the person’s annual exempt amount. The rate of tax for individuals is determined after making a reasonable estimate of the amount of taxable income for the year.
Gains on disposals reported on the new return can be ignored when determining whether to register for self-assessment. Enquiries into the return will be able to be made separately from any self-assessment return that may be due.
For disposals by UK residents, the new reporting and payment requirements will not apply where the gain on the disposal (or the total gain where more than one residential property disposal is made in the year of assessment) is not chargeable to CGT (for example where the gains are covered by private residence relief, unused losses or the annual exempt amount), arise from the disposal of a foreign residential property in a country covered by a CGT double taxation agreement, or arise to a person taxed on the remittance basis.
For non-residents, the reporting requirement is expanded from 6 April 2019 to include all companies. However, an exception from making a payment on account for those that make self-assessment returns will cease for disposals on or after 6 April 2020 in line with the introduction of payment on account for UK residents.
This is a radical change and will require taxpayers and their advisers to gather data, calculate and report the relevant gains within the 30 day reporting window.
Readers who are contemplating the sale of a residential property that may trigger a CGT charge might be advised to complete the sale before 6 April 2020. Sales before this date will be reported on your self-assessment tax return for 2019-20. The filing deadline for this return is 31 January 2021.
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