Seismic change to reporting of disposals of UK residential property from April

From 6 April 2020, there will be significant changes to the reporting of disposals of UK residential property.

This article summarises what you need to know, whether you are a UK resident or a non-resident.

Summary

There are different rules for the payment of Capital Gains Tax (CGT), depending on whether or not you are a UK resident and, for land and buildings, whether the property is residential or commercial.

• Up until 5 April 2020 UK residents pay all CGT under Self Assessment.
  • From 6 April 2020, CGT on residential property sales must be declared and a payment on account made to HMRC, within 30 days of completion.
• Non-residents have been required to pay CGT on disposals of UK residential property within 30 days since April 2015, unless the individual is under Self Assessment, in which case the normal Self Assessment payment date applies.
  • From 6 April 2019, this extended to direct disposals of non-residential UK property by non-residents and indirect disposals of interests in a ‘UK property rich’ entity.
  • From 6 April 2020, all CGT due by non-residents on disposals of UK land and property, and on indirect disposals of interest in UK property rich entities, must be paid within 30 days even if the individual is under Self Assessment.
• It is possible to apply to pay CGT in instalments on certain gifts and where consideration is deferred if conditions are met. For further information on gifts, get in touch with our tax team.
• Interest and penalties apply to late paid CGT.

From 6 April 2020:

• CGT on residential property sales by UK residents must be declared and a payment on account made to HMRC, within 30 days of the completion date.
• There is no change for non-residential property or sales of other assets, such as shares. The Self Assessment payment deadline of 31 January following the tax year of disposal continues to apply to these disposals. Capital Gains Tax due by non-residents on direct disposals of UK immovable property and the indirect disposals of interests in property rich entities, such as companies and trusts holding UK property must be paid within 30 days.
  • This applies whether or not the individual is under Self Assessment.
  • This will align the payment of tax with the deadline for filing the non-resident CGT return which has always been due within 30 days.

Overview

CGT payment dates vary depending on whether you are a UK resident or a non-resident disposing of UK property.

UK Residents

Residential land and buildings

For disposals completing on or after 6 April 2020, the Finance Act 2019 introduces the following new rules:

• A payment on account of Capital Gains Tax must be made within 30 days of completion of the disposal.
  • For example, for a disposal on 31 July 2020 payment must be made by 30 August 2020.
• Payment must be made alongside submitting a new online property disposal return.

Penalties for late payment under the 30-day deadline:

If the 30-day payment (and filing) deadline is missed, penalties will be due under schedule 56 FA2009.

Late Payment Penalty
30 days late 5% of tax due
6 months late 5% of tax outstanding at that date
12 months late 5% of tax outstanding at that date

Interest will accrue at the normal rate for late-paid tax, currently 3.25%.

Payment deadlines for all other capital assets

These rules generally only apply to UK residents, as non-residents are not subject to UK CGT on the disposal of assets which are not immovable property, other than certain specific asset in certain circumstances. However, where a non-resident is subject to CGT on assets other than immovable property these rules will apply.

• For all assets other than residential property, such as shares and other investments, Capital Gains Tax remains due under Self Assessment meaning that the tax is due by 31 January following the tax year in which the disposal takes place.
• Penalties and interest are charged on late payments at the same rate as those for residential property sales as set out above.

Non-residents

For disposals of UK immovable property and indirect disposals of an interest in a ‘UK property rich’ entity, which completes on or before 5 April 2020:

• CGT is due within 30 days unless the individual is under Self Assessment, in which case the normal Self Assessment payment date of 31 January after the end of the tax year of disposal applies.
  • Prior to 5 April 2019 this only applied to disposals of residential UK property by non-residents, after that date it applies to all UK immovable property disposals.

For disposals of UK immovable property and the indirect disposal of an interest in a ‘UK property rich’ entity, which complete on or after 6 April 2020:

• all Capital Gains Tax due by non-residents on disposals of UK land and property must be paid within 30 days, even where the individual is under Self Assessment.

For more information about these changes and how they may impact you or your business, contact Colin Burns at cburns@geraldedelman.com.