Property Disposals For those who live in the UK, it is important to note that certain CGT rules apply to individuals, trustees, and personal representatives when transferring land or property. This article provides a high-level overview of the key reporting and payment requirements for CGT on property disposals. Note that additional forms may be required, such as the Self-Assessment tax return, which is filed annually.
Date of Disposal
This is crucial for CGT as it determines the tax year in which the gain is assessed. Generally, the date of disposal is when contracts are exchanged or, in the case of conditional contracts, when the condition is met. Filing and payment deadlines are tied to the completion date, which may occur later. As of now, CGT reporting and payment are due within 60 days from the completion date.
Reporting and Payment Regime
Key Rules for UK Residents
A UK resident must submit a CGT return if a CGT payment on account is due for the disposal of a UK residential property. A CGT return is not required if the entire gain is covered by Private Residence Relief (PRR) or if the property is sold at a loss. If CGT is due, the payment on account usually equals the expected liability, though it can be higher if allowable capital losses are not fully utilized within the 60-day window.
For instance, if the property is disposed of on May 1, 2024, CGT is payable by June 30, 2024. Previous losses might be available but could be unknown by the CGT due date if the previous tax return is not yet completed. Thus, it is prudent to file a separate CGT return within the 60-day deadline and pay an on-account amount of 24% of the gain. Any excess CGT will generally be refunded once the self-assessment tax return is filed.
Expenditures incurred after the completion date are not considered when calculating the initial CGT payment on account but will be adjusted in the self-assessment tax return.
What Non-UK Residents Need to Know?
Non-UK residents are subject to the same CGT reporting regime but with some differences. They must report CGT on disposals of UK residential property, UK non-residential property, and interests in property-rich companies (those with more than 25% of their value in UK property). This requirement applies even if no CGT payment on account is due, except for certain ‘excluded disposals,’ such as transfers to a spouse on a no gain/no loss basis.
Self-Assessment Tax Returns Explained for Property Disposals
Individuals, trustees, and personal representatives who file self-assessment tax returns must include property disposals in their annual tax returns. These returns are due by January 31, following the end of the tax year, and include details of all income and capital gains for that tax year.
Avoiding Penalties for Late Filing and Payments
The consequences of not adhering to CGT reporting deadlines and payment obligations are severe. Penalties apply to both UK and non-UK residents. Here’s a breakdown of the key penalties:
Late Filing Penalties for Property Disposals:
- After 60 days: £100
- More than 6 months late: Greater of £300 or 5% of the tax due
- More than 12 months late: Greater of £300 or 5% of the tax due plus additional penalties
Late Payment Penalties:
- 30 days after the due date: 5% of the tax due
- More than 6 months late: Greater of £300 or 5% of the tax due
- More than 12 months late: Additional penalties
Interest will be charged if the tax remains unpaid after 60 days. HMRC may also impose daily penalties of £10 per day up to a maximum of 90 days if the return is more than three months late.
ConclusionÂ
Understanding the reporting and payment requirements for CGT on property disposals is crucial to avoid penalties for non-compliance. These regulations apply to both UK and non-UK residents and must be adhered to within the specified timelines. Therefore, seeking assistance from qualified financial advisors like TaxCan Accountants and Cangaf Ltd. in the UK becomes necessary. We not only guide you through each aspect of your capital gain taxes on property disposals but also deal with HMRC on your behalf. This keeps you stress-free, allowing you to focus on other important matters.
Below are some more helpful links for Reporting and Payment of Capital Gains Tax on UK Property Disposals!
https://www.rossmartin.co.uk/capital-gains-tax/capital-gains-tax-on-uk-property-disposals
