Service: Taxation Wealth management 

Sector: Property 

Changes to administration of UK residential property gains

24 Sep 2019

The 2015 Autumn Statement introduced reporting and payment obligations for UK residents disposing of residential property. 

The changes were legislated in the Finance Act 2019 and will be effective from 6 April 2020.

This new piece of legislation means that gains realised from the disposal of residential property must be reported via a Residential Property Return (RPR) and payment on account made within a 30-day window. Under the current regime, the deadline to report and settle any liability arising on capital gains is 31 January following the tax year of disposal, which is a 10 – 22-month window and is not in line with other taxes e.g. PAYE. The new narrow window also resolves issues with taxpayers not retaining sufficient funds with which to settle their Capital Gains Tax (CGT) liabilities. 

As usual, there is an array of consequences for not complying with the new regime. HMRC accepts that it may be difficult to provide the exact figures in the 30-day reporting window and in this respect, estimates and assumptions may be made so long as evidence supporting these figures are retained. 

There is no reporting requirement where: 

  • there is no gain, no loss;
  • the gain is covered by private residence relief;
  • the gains are under the CGT annual exemption;
  • disposals are by charities or are of any pension scheme investments; 
  • disposals are the grant of an arm’s length lease for no premium to a person unconnected with the grantor.

An RPR is not required where an individual has submitted, or is due to submit, a self-assessment return which takes into account the disposal, prior to the filing deadline for the RPR. Only one RPR is required if there are two or more disposals on the same day. Individuals who are within self-assessment must report any residential property gains via both the RPR as well as their self-assessment return, however, the self-assessment return will supersede the RPR.

There are provisions to allow the amendment of the CGT Return, which may result in additional liabilities or a refund arising. Where a self-assessment return is not required, the RPR can be amended within 12 months of the 31 January following the tax year in which the disposal was made. Where a self-assessment return accounts for the disposal, amendments can only be made to RPR up to either the deadline for the self-assessment return or the date the self-assessment return is filed, whichever is earlier. All other rules regarding enquiries, amendments of returns during enquiries and determinations by HMRC and discovery assessments apply in the same way as self-assessment returns.

The payment on account required is the amount of CGT notionally chargeable at the filing date. This is the tax that would be due if, under the normal rules of calculating chargeable gains for a tax year, the tax year ended at the time the disposal is completed. In calculating the amount, only residential property gains are considered, but any unused allowable losses for capital gains purposes incurred by the time the disposal is completed can be used. Available reliefs and the annual exempt amount are applied in the normal way. Anticipated gains and losses on future disposals are not taken into account. The amount of CGT payable on account is the amount after applying the applicable tax rate to the net gain.

The legislation marks significant changes in the administration of UK residential property tax. For further information or advice on what you need to do to prepare and comply with the new reporting and payment obligations, contact our tax advisory team.

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