With effect from 6th April 2020 there is a fundamental change to the administration of Capital Gains Tax for sales or other disposals of UK residential property.
Individuals, trustees and personal representatives realising a taxable gain from the sale or other disposal of UK residential property will have to make a ‘residential property return’ and a payment on account of Capital Gains Tax within 30 days of the completion of the disposal. A return is not required where the capital gain is not taxable, for example if it is covered by main residence relief, but otherwise interest and penalties will be charged if the deadline is missed.
It is likely that the changes will mainly affect those disposing of a second home or rental property.
Currently Capital Gains Tax is payable by 31st January of the tax year following the tax year of disposal. Therefore, the new deadline is a major reduction in the timescale that applies between selling a residential property and reporting and paying the tax. This time limit could cause problems where the calculation of capital gains tax is complicated. The legislation does, however, allow for certain estimates and assumptions to be made in calculating the payment on account and correcting this at a later date, either via self assessment or a further residential property return.
Those within self assessment will still be required to declare this on their Tax Returns in addition to the Residential Property Return.
These changes coincide with the changes to the reduction in the final exemption period for private residence relief from 18 months to 9 months and also restrictions to letting relief. These changes have yet to be widely published therefore, after 5th April 2020, we would urge anyone in the process of selling residential property to contact us immediately.
If you have any queries with regard to the above please do not hesitate to contact us.
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