From 6 April 2020, an individual (not a company) but also trustees and personal representatives, who sell a house or flat and make a capital gain on which CGT is payable (i.e. not fully covered by main residence relief (MRR)), must report the gain and pay the CGT due within 30 calendar days of the completion of the sale of the property. This was the so called new ’30 day CGT pay and file regime’!
However, in the Autumn 2021 Budget, changes were made! The Government extended the time limit for reporting the gain and paying the CGT from 30 days to 60 days. This revised measure has effect for disposals that complete on or after 27 October 2021.
These new measures only apply to residential property, not commercial. Additionally, this new regime is not applicable to companies. However, if a company holds a residential property, it might have to pay the Annual Tax on Enveloped Dwellings (ATED), which is very expensive!
An individual only has to pay the CGT and report the gain to HMRC within 60 days of completion if CGT is actually payable on the gain. If no CGT is payable, then there is no requirement to report the gain and pay the CGT within 60 days of completion.
However, non-UK residents must declare such disposals from 6 April 2020, under the new regime, regardless of whether a chargeable gain arises or not.
The individual has to open up a new capital gains tax on UK property account, in order to report the gain.
In practice, this will mainly affect UK individual landlords selling UK buy-to-let houses and flats. If a landlord sells seven rental properties in the year and makes chargeable gains on each one, he has to electronically submit seven ‘in year CGT returns’ and also, on the same dates, make seven payments of CGT.
The new regime also applies to the disposals of second homes and relevant residential property capital gains not fully covered by MRR.
The biggest problem that accountants are having in practice is relying on their landlord clients to notify them, during the tax year, when they complete the sale of a residential rental property!
The gain is taxable in the fiscal year in which you exchanged contracts to sell the property, despite the reporting being required 60 days after completion.
In an extreme case, this reporting may fall into a different tax year, but this is irrelevant.
Simon exchanges to sell his rental property on 4 April 2022. He completes the sale on 24 April 2022. He makes a gain of £120,000. This gain is taxable for the fiscal year 2021–22.
He has to report the gain by 23 June 2022 and also pay the CGT by this date, on account of 2021–22, under the new 60 day CGT pay and file regime.
• An online ‘capital gains tax on UK property’ return must be made during the tax year for each appropriate disposal.
• The new CGT reporting regime is in addition to declaring the gain on the normal self-assessment return, not instead of.
• If the residential property is held jointly, each owner is required to make their own in year CGT return, i.e. husbands and wives one each. They might also have different CGT rates! This new regime is aimed at the owners of the property, not the property itself.
• Capital gains arising on overseas properties are not part of this new regime.
• The new 60-day CGT regime could also apply to a sale of a residential property following a gift, a transfer in or out of a trust if a CGT holdover relief claim has not been made, or a transfer as part of a divorce settlement.
• If a trust has to submit the new CGT return, HMRC has confirmed that the trust must be registered on the trust registration service.
If you would like to use our services for completing the returns, please contact us.
