From 6 April 2020, there has been a substantial change in the way that the gain on residential property sales need to be reported to HMRC. To help you ensure that your clients are not being caught out, we have pulled together a short summary of the new rules for your reference.
If any of your clients are affected by these rules and are looking for professional assistance in complying with their reporting requirements, we would be happy to assist.
The New Rules
UK residents need to report and pay their capital gains tax liabilities on property sales within 30 days of the completion of the sale. Previously, this did not need to be reported until they completed their tax return for the year, but this change brings the treatment more in line with the reporting requirements for non-UK residents that were brought in a few years ago.
Who Needs to Report?
Anybody that sells a UK residential property will need to report their sale under the new regime, unless they meet one of the two following conditions:
It is important to note that the new rules apply to individuals, trustees and joint property owners or partners, even if they already submit a self-assessment tax return. The only exception is in the rare circumstance where the tax return is submitted before the end of the 30 day period.
For anyone that does not submit on time, they face the following penalties:
In addition to the above, HMRC may also charge £10 daily penalties (up to 90 days) if the return is between 3 and 6 months late.
How is a report made?
The report is made online using a ‘Capital Gains Tax on UK Property’ account that the seller will need to setup with HMRC.
In certain circumstances HMRC will allow a paper return, but this will need to be specifically requested and the 30-day deadline remains in place.
What you can do?
Although we appreciate that you may not want to give tax advice to your clients, there are a couple of ways that you can help make sure they are meeting their obligations (and avoid penalties):
The only circumstances where there will not be any gain on the property are:
If neither of these conditions are met, the client should consider taking professional advice to calculate if a gain has been made. We have prepared a checklist of the details your client would need to provide for a tax adviser to review their position, which you are welcome to pass on to your clients.
As mentioned above, in order to report their gain, a HMRC online account will be required. This should be a quick process, but we would recommend that the seller sets up their account as early in the selling process as possible (perhaps when they are first putting it on the market) so this does not create an issue down the line.
We have prepared a guide on how to set this account up, which, again, you are welcome to pass on to your clients.
Stewart McKinnon, Director