The government introduced reporting requirements for UK residents disposing of residential property on or after 6 April 2020.
From this date, taxpayers were required to report any disposals of UK residential property and pay their estimated capital gains tax (CGT) liability. Between 6 April 2020 and 26 October 2021, taxpayers were required report and pay within 30 days of the completion date. For completions on or after 27 October 2021, the time limit was increased to 60 days, as announced at Autumn Budget 2021.
For those within self-assessment, the property disposal will also need to be reported on their self-assessment tax return. The reporting and taxation of disposals of non-residential property, and of property located outside the UK, are unaffected by the rules. The below should be read on the assumption that the disposal takes place on or after 27 October 2021.
Who is affected by the rules?
The following UK tax resident persons are within the scope of the 60-day CGT rules:
- Personal representatives;
- Partners in partnerships and limited liability partnerships; and
- Joint owners of property.
What if I am not UK tax resident?
There are similar rules for non-UK residents, covering both residential and non-residential property disposals. These are not covered by this briefing, and professional advice should be sought as appropriate.
What disposals fall within the 60-day CGT rules?
The rules apply to disposals of UK residential property where the date of disposal (date of exchange of contracts) falls on or after 27 October 2021 and a CGT liability arises on the disposal.
The 60-day rules apply to direct interests in residential property only, for example the sale or gifting of a house. Disposals of indirect interests, such as shares in a company which holds UK residential property, are not caught.
The definition of residential property includes any property suitable for use as a dwelling, or which is in the process of being constructed or adapted for such use. If there has been mixed use throughout the ownership period, only the residential element of the gain and the associated CGT needs to be reported under the 60-day rules.
Typical examples where taxpayers may need to submit a 60-day return include:
- A property they have never lived in, or only lived in for part of the ownership period;
- Holiday homes; and
- Rental properties.
There is no 60-day reporting requirement where no tax arises on the disposal. This may be the case where:
- The disposal is a ‘no gain, no loss’ transfer between spouses or civil partners;
- Any gain arising on the disposal will be fully covered by exemptions, for example the annual exemption or Private Residence Relief; or
- The property is being sold at a loss or nil gain.
Taxpayers selling their only or main residence should not be caught by the 60-day rules, provided the property has been occupied by them throughout their period of ownership.
In addition, there will be no 60-day reporting requirement if the disposal represents one of the following:
- The grant of a lease on commercial terms for no premium, to an unconnected person;
- Disposals by a charity;
- Disposals of a pension scheme investment; or
- A disposal of property which is chargeable to income tax.
What is the procedure for reporting the disposal to HMRC?
HMRC has developed a new digital service, through which all reports should be made.
In order to make the report, individuals and trustees will need to login via the Government Gateway and register for a ‘Capital Gains Tax on UK Property’ account with HMRC. They can choose to report the disposal themselves, or authorise their tax adviser to report the disposal on their behalf.
Once the 60-day return is submitted, HMRC will issue a payment reference, under which a payment on account of the estimated CGT arising from the disposal can be made.
What is the deadline for reporting the disposal?
Taxpayers have 60 days from the date of completion (not the date of exchange of contracts) to report the property disposal and make the CGT payment on account to HMRC.
Late filing penalties may be charged, together with interest on any unpaid tax. In certain circumstances, a 60-day return may not be required, for example if the taxpayer has already submitted a self-assessment tax return reporting the disposal.
How is the CGT payment on account calculated?
A tax computation must be prepared as part of the 60-day reporting, in order to calculate the estimated tax due. The payment on account must then be made within 60 days of completion.
In calculating the gain arising from the residential property disposal, taxpayers can take into account their annual exemption (which the government confirmed will remain £12,300 for individuals up to and including the 2025-26 tax year) and any allowable capital losses arising prior to the disposal, including brought forward losses from earlier years. The tax computation cannot include capital losses that arise later in the tax year, but it is permissible to take into account any anticipated reliefs.
Although it is possible for submitted returns to be amended for inaccuracies, they cannot be adjusted to take into account matters that occurred after the completion date of the disposal.
A computation of the final tax position will normally be undertaken when preparing the taxpayer’s self-assessment tax return. This will take into account other factors (such as 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 of the final self-assessment liability, and interest will be charged where the estimated tax payment is less than the actual CGT due.
- Taxpayers planning on selling or gifting residential property should consider getting in touch with their usual Saffery Champness contact to ascertain whether there is a reporting requirement under the 60-day rules.
- Taxpayers should collate information and let their tax adviser know of their plans as early as possible, to minimise the risk of missing the 60-day deadline and assist with cashflow planning.
- Where a property disposal results in a loss, a 60-day return does not need to be filed. However, in certain circumstances it may be beneficial to file a return to claim the loss with HMRC.
- Taxpayers should consider whether there are opportunities to realise capital losses prior to disposing of a residential property, thereby enabling the losses to be included when calculating the estimated CGT payment on account.
- Taxpayers should be aware of the changes to the reliefs available on the sale of properties which have not been their main residence for the entire period of ownership. Since 6 April 2020 some of these reliefs have been curtailed.
- If a taxpayer is unsure whether they are UK or non-UK tax resident at the time of a disposing of UK property, they should discuss this with their usual Saffery Champness contact as the reporting requirements may differ.
- Following the end of the tax year in which a residential property disposal is made, taxpayers should review their position to determine if tax was overpaid on the estimated CGT payment on account.
If you have any specific queries in relation to CGT reporting, please speak to your usual Saffery Champness partner, or contact Robert Langston.