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Legal Update: Reporting Capital Gains Tax on a Property Disposal

The way in which UK residents are required to report residential property disposals is changing in a dramatic fashion.

Any disposal from April 2020 whether it be by an individual, trustee or personal representative, will be required to notify HMRC via a new “Residential Property Return” (RPR) within 30 days of the disposal of the property.

Along with the RPR, HMRC will expect a payment on account of the Capital Gains Tax due, even where you are already submitting a self-assessment tax return(s).

It is important to note, like with the majority of HMRC returns / forms, penalties and interest will be applied for late submission and / or payment.

The disposal(s) of the property will still also need to be declared on your self-assessment return(s), and this will provide the final definitive capital gains tax liability, as it is proposed the submission of the self-assessment tax return will supersede the RPR.

Therefore, it is extremely important that you speak to your Hopkins Conveyancing Team on 01623468468 and/or a member of the Stopfords Accountants team on 01623420269 to ascertain who will be submitting the RPR on your behalf and calculating the tax liability.

The tables below, as provided by Stopfords Accountants, are aimed to provide a brief summary but full advice should be obtained:

Following our previous articles and notifications we thought it would be wise to remind clients who have / or are thinking of having a rental portfolio that there are major changes arriving from 6 April 2020, when a property is sold.

The table(s) below show the key differences regarding property sales before and after the 6 April 2020.

Reporting and Payment of CGT to HMRC

These changes we feel are going to catch many people out, as they may be unaware the rules regarding the disposal(s) property have changed. HMRC can and more than likely will issue fines and penalties for non-compliance.

Current Rules Future Rules (6 April 2020 Onwards)
CGT disposals are currently declared on the annual Self-Assessment Tax Return and any tax payable is due on 31 January following the end of the tax year.

For example, 19/20 CGT liability is due 31 January 2021

Within 30 days of completion of sale, it will be a requirement to submit an online return to HMRC with an estimate of CGT due. Any amount due will also be payable within 30 days.

The CGT disposal will still then need to be declared on the relevant tax return and additional CGT / overpayment of CGT will be dealt with at this time

 

Principle Private Residence Relief (PPR)

This has always been a key relief for people who have had a main residence and then moved out and kept the property to be let out as an investment and / or other reasons.

Current Rules Future Rules (6 April 2020 Onwards)
Individuals are entitled to claim the last 18 months of ownership as qualifying for PPR even though they might not have been living in the property at this point time.

This last 18 months is then exempt from CGT

6 April 2020 will see only the last 9 months of ownership being exempt from tax and thus halving the amount of relief available.

The relief has reduced dramatically over the past few years from 36 months to 9 Months

 

Letting Relief: Potential Loss of £40,000

Another important planning and vital relief which has been used by us (Letting Relief) is being adapted and in many cases, we believe most landlords will no longer qualify for this relief.

Current Rules Future Rules (6 April 2020 Onwards)
At present if you sell a property which was once your main residence and subsequently let it, it is possible to deduct a maximum of £40,000 from the amount of the chargeable gain

 

Going forwards the relief is being withdrawn unless you occupy your main residence with a “lodger”

 

 

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