Capital Gains Tax – are you ready for action?

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  Posted by: The Probe      17th May 2020

Regular readers will know that the upcoming changes to the way that Capital Gains Tax (CGT) is paid is a topic that I keep coming back to. And for good reason! The new legislation around CGT, which will come into force after 6 April 2020 and applies to individuals and trusts (not companies), has been described as a “seismic shift” in the rules. Are you ready?

In a nutshell, after 6 April, on completion of a sale of UK residential property, you will need to consider your tax filing and payment obligations right away. Under the just- about-still “current” rules, you can wait until after the end of the tax year.

A shorter deadline for filing:

• After 6 April, an individual/trust disposing of UK residential property must file a UK Land Return within 30 days of the sale’s completion date.
• If a property is held jointly/in partnership, each owner is required to file a UK Land Return for their share of the disposal.
• Penalties apply for late filing, starting at £100, with immediate effect. For longer delays and larger transactions, the penalty could be significant. You will have the option of making an appeal, of course, although HMRC isn’t always the most “flexible” in these situations…

A shorter deadline for payment:

• The individual(s)/trust making the sale must pay an estimate of their CGT within the new, 30-day deadline.
• This estimate will depend on several factors and will be treated as a “payment on account” against the total income tax/CGT liability for that tax year.
• When the annual self-assessment return is filed, there may be a refund or additional tax due.
• If additional tax is due, interest will be payable at the rates set by HMRC.

What about exceptions? As ever, there are a few, one being when any gain is protected by principal private residence (PPR) relief, or by capital losses settled before the sale takes place. Working out if and how much of the gain is sheltered is tricky though, and not worth the headache, so talk with an expert. The team at Lansdell & Rose are not just tax specialists, but are dental accountancy specialists too.

For non-UK resident individuals/trusts, there are no changes after 6 April.

What do you need to do?

The changes were initially proposed for 2015. As any property owner will know, it’s not uncommon to change your mind about if and when to make a disposal. Circumstances change and life and business gets in the way. But if you do need to make a disposal now and it won’t be wrapped up before the new legislation comes into force, there is no need to worry or make any rash decisions. Avoiding a penalty is important though, so if you haven’t had to concern yourself with the CGT changes until now, it’s definitely time to get informed and organised.

Your main concern may be not knowing precisely what your GCT liability will be, because the figure is estimated. Other “as yet unknown” factors will also be relevant and you might not have this information at the time of sale (for example, other disposals, other income) either.

The writing has been on the wall with regards to CGT for a while now, so that tax on any gain is paid within a much shorter timeframe than it has been in the past. Talk to your specialist as soon as you put your property on the market. This will give you peace of mind that you are staying within the new rules, like meeting the shorter deadlines, as well as helping you to make a good estimate of your tax liability.

For more information please visit www.lansdellrose.co.uk or call Lansdell & Rose on 020 7376 9333.


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