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Capital Gains Tax changes on residential property from 6 April 2020

As previously reported, from 6 April 2020 a UK resident taxpayer who disposes of a residential property in the UK, which gives rise to a CGT charge, must report and pay the tax due within 30 days of completion of the sale.

Here our tax specialist Fiona Phillips answers some questions regarding this new regime.

 

Will this apply to the gain made on the sale of my home?

This won’t apply to the sale of your home if the gain is exempted from CGT under the Principle Private Residence Relief rules.

How do I report the gain to HMRC? I usually send a tax return after the tax year has ended.

The gain must be reported online. The taxpayer creates a “Capital Gains on UK Property Account” via the HMRC website, which either they or their agent can then use to report the gain within 30 days. The tax is also due within 30 days.

What information do I need to report?

HMRC will need the property address, dates of sale and purchase, proceeds of sale; purchase price and any allowable costs and any information relevant to the calculation of the gain.

I made a loss on a property I sold last year. Can I offset that loss against the gain on the property?

Yes, capital losses can be carried forward and set against future chargeable gains.

Given the recent market downturn I intend to sell some shares later this tax year, crystallising a capital loss. Can I offset this future loss against the gain on the property?

For the purposes of reporting and paying tax, only losses already crystallised by the time the gain is reported (ie within 30 days of completion) can be offset . Any adjustment needed due to other losses later in the year will be dealt with under self assessment after the end of the tax year.

I am a property developer; I buy houses cheaply, improve them and sell them on. Am I subject to these rules?

If you are treated as trading in property then you will be subject to tax on the trading profits – either Income Tax if a sole trader/partnership or Corporation Tax if you trade via a company. The CGT rules therefore will not apply to you. This is a matter that your tax advisor could assist you with.

I am proposing to help my grown up daughter by gifting to her a residential investment property that I own. It is worth considerably more now than I paid for it, but my daughter won’t pay me for it. Will I need to report this?

Any residential property disposal that gives rise to a chargeable gain will need to be reported, even a gift to a family member (apart from a transfer to a spouse or civil partner which is CGT free). Again, specialist tax advice should be sought on this matter.

This is different to the way that I have reported gains on buy-to-lets previously, and I’m not sure that I can readily access the information needed. Will HMRC allow me extra time to send in the calculation?

HMRC have stated that they will not issue late filing penalties for returns due in the first three months of the new system, as long as they are filed by 31 July 2020.

 

If you are looking for further information and assistance on these matters, contact Fiona directly: fiona.phillips@andrewjackson.co.uk

The team is here to help you, and all of our departments are available to provide you with legal advice and solutions that are tailored to the requirements of you and your business at this challenging time.

Talk to the team today on 01482 325242 or email enquiries@andrewjackson.co.uk

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