20 July: Under new rules capital gains tax (CGT) on disposals of UK residential property must be reported by 31 July to avoid a penalty, reminds ICAEW’s Tax Faculty.

A new requirement to report and pay capital gains tax (CGT) on disposals of UK residential property within 30 days of completion applies to disposals (which usually means the date of exchange) made by UK resident taxpayers   on or after 6 April 2020. 

Ahead of its implementation ICAEW recommended that the government should delay the introduction of this measure due to a lack of awareness and doubts over whether the online system has been adequately tested, but the government nevertheless decided to proceed.

However, in response to the COVID-19 pandemic the government extended the reporting deadline so that no late filing penalty will be charged for any transactions completed between 6 April 2020 and 1 July 2020 which are reported by 31 July 2020.

The extended deadline applies only to UK resident taxpayers for whom the requirement is new; non-residents have to file within 30 days of completion.

The requirement to pay any CGT due within 30 days of completion was not deferred and interest will be charged on any tax not paid within 30 days of completion.

UK residents are required to report gains on UK residential property only where tax is due.

On 8 July 2020, HMRC published a new guidance page for agents: Managing your client’s Capital Gains Tax on UK property account.

ICAEW members who have not yet used the new system to report a gain should be aware that it involves a number of steps that involve the client and may therefore take some time to complete.

• The client has to have government gateway credentials and set up an online CGT account. This is a standalone account which is separate from their self assessment account.
• Once the CGT account is set up the client provides the details to the agent and there is a separate step to authorise the agent. Existing self assessment agent authority is not recognised for the service.

ICAEW and other professional bodies have expressed considerable concerns about the process to HMRC, but at this stage it is not expected to change significantly.

Paper returns

Paper returns are available but have to be requested from HMRC and are sometimes prepopulated with the taxpayer’s details.

Paper returns are intended for use by digitally excluded taxpayers who are  unable to use the digital service, but they are also necessary in two situations where it is not yet possible to use the digital service because the functionality has yet to be fully developed by HMRC:

• Currently, only the first return for UK property sales or disposals in the tax year can be submitted online. Paper returns must be filed for second or subsequent sales. The functionality for second and subsequent sales is expected soon, but no specific date has been provided by HMRC.
• Disposals made by a deceased’s estate during the period of administration cannot be reported online.

ICAEW members have reported that some advisers on HMRC helplines are not aware of the process for issuing a paper return.

Non-residents

The reporting requirements for non-residents are wider and include:

• residential UK property or land (land for these purposes also includes any buildings on the land);
• non-residential UK property or land;
• mixed use UK property or land; and
• rights to assets that derive at least 75% of their value from UK land (indirect disposals).

Non-residents must report disposals even where no tax is due.

Non-residents can now use the new digital service for all types of disposal. The form that was in use for non-residents to report gains should only be used for disposals made on or before 5 April 2020.

Self assessment returns

Gains reported through the new service must also be reported on the taxpayer’s self assessment tax return. However, a taxpayer that is not otherwise required to file a return will not have to do so if all gains have been reported through the new service.