60 Days to File CGT Return for UK Residential Property

From 6 April 2020, where a UK resident individual, trustee or personal representative or partner in a partnership disposes of UK residential property and capital gains tax is due, a CGT on UK property return must be filed, together with a payment on account of capital gains tax, within 60 days of the date of completion of the transaction. This was originally set at 30 days but recently extended following the Budget announcement on 27th October 2021. If disposed of up to 26th October, 2021, the 30 day rule still applies.

Crucially non UK residents are required to report not just disposals of residential property, but all disposals of UK land whether or not they realise a gain including indirect disposals such as the sale of shares in property rich companies. A company is property rich if 75% or more of its gross asset value derives from UK property.

For those meeting the requirements of Self-Assessment, the property disposal will also need to be reported on their personal Tax Return.

Relevant Disposals

• A sale of UK property at arms length

• A gift, transfer or deemed disposal

• A sale at undervalue

Types of Property

• A property never lived in, or only lived in for part of the ownership period where not a main residence

• A holiday home

• A rental property

• A mixed residential and commercial property.

  Examples where there is no 60-day reporting requirement as no tax arises on the disposal:

  The disposal is at ‘no gain, no loss’ tax neutral transfer between spouses or civil partners

  The chargeable gain arising on disposal is fully covered by the annual exemption, reliefs, such as principal private residence relief or brought forward capital losses.

  The property is sold at a loss

Computing the Capital Gain

The capital gain will be calculated based on net sale proceeds received less the acquisition cost. Note that non-UK residents can opt to follow a more favourable treatment and ‘rebase’ the base cost of the property to the market value as at 5 April 2015. Capital expenditure increases the value of a property. A deduction can be claimed for enhancement expenditure. This includes alterations, additions or improvements reflected in the state of the property on disposal. An example would include a substantially upgraded kitchen which was refitted and re-plastered with standard units and appliances and finishes replaced with higher quality materials. If the property was your main residence at a point in time then a proportion of the gain will be exempt from capital gains tax and this is calculated by multiplying the capital gain by a fraction equal to the number of days the flat was occupied as your Principle Private Residence (including the final 9 months) divided by the total number of days you owned the property. The final nine months of ownership qualify for Principal Private Residence relief when a property was a only or main residence at a point in time.

Payment on Account of Capital Gains Tax

The actual capital gains tax liability will be computed once the taxpayer’s Tax Return has been prepared. This will take into account an individual’s taxable income for the year and losses realised after the property disposal that were not reflected in the original tax estimate. The CGT paid is treated as a payment on account, and interest will be charged where the estimated tax payment is less than the actual CGT due.

FiIing Requirement

To file the return it is necessary to set up a government gateway account and create a CGT on UK property account. A client can authorise an agent to file the return on their behalf and there is a separate agent authorisation process. An agent should log in via Agent Services and enter the client’s Capital Gains Tax account reference number and post code.

Penalties

Where the return is not filed within 60 days (previously 30 days) of the completion date an automatic late filing penalty of £100 will apply. Fixed £300 penalties or 5% of any tax due if greater will be charged if the return is more than 6 months and 12 months late. A taxpayer can appeal these penalties if they have a reasonable excuse.

Enquiry Period

Where an individual is not in self-assessment, the return is treated as having been filed on 31 January following the year of assessment in which the disposal takes place. The individual does not need to file a self-assessment tax return. This is in contrast to someone in self-assessment for whom the enquiry window ends 12 months after the submission of the self-assessment tax return.

Keeping Good Records

If a taxable gain arises and you are required to file a 60 day CGT Return you should keep records of the original cost, incidental costs of acquisition and disposal, improvements and valuation if the property was inherited or a gift. This information would be requested by HMRC in the event of an enquiry into your return. If you owned the asset on 31 March 1982, you need evidence of market value of the asset at that date. If you bought the asset after 31 March 1982 you need to keep records showing the original cost of the asset. If these are not available you should request a valuation of the asset on the date of acquisition for example, from a surveyor or an auctioneer. You should retain evidence of the market value of the property on the date of transfer if the asset was inherited or a bargain not at arm’s length.

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ACT TODAY

Visit HMRC’s website for more information and to register for your gateway account if this applies to you.

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FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment, and professional services. Our clients vary in size from self-employed sole traders, small enterprises and medium-sized businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.