CONSULTATION: Proposed 30 days’ deadline to pay CGT on residential property

Currently the 30-day deadline to submit an online form and settle capital gains tax on UK residential property disposals apply to non-residents that did not meet the requirement to defer payment until 31 January following the end of tax year of disposal.

On 11 April 2018 HMRC released consultation to review payment dates for capital gains tax on the disposal/ gift of residential properties (UK and overseas).  It is intended that the new proposals for the 30-day payment and return date will come into effect from 6 April 2020 (a deferred date from April 2019) and shall affect individuals and trustees.

The ‘30-day’ will start from the ‘completion’ date, which is not from when contracts are exchanged but instead when the property conveyance takes place (which is later).  A return will need to be completed where a capital gains tax liability arises (not if it is a nil gain nil loss transfer or fully covered by private residence relief).  Returns will need to be prepared and submitted within 30 days, each time there is a residential property disposal and reconciliations of payments can be made at the end of the tax year.  The payment on account mechanism will not alter the disposal date for capital gains tax purposes (usually completion).  For example, where exchange and completion take place in different tax years, the payment on account mechanism will credit the capital gains tax due in the earlier tax year in which the disposal took place

Please refer to our article on what is a residential property for the purposes of capital gains tax:

In terms of overseas properties, a report by a UK resident may be required unless payment of overseas tax has been paid on the gain or if taxed on remittance basis.

The changes proposed will increase the administration burden on individuals and trustees and put significant pressure on finding funds to pay any tax (as this will often be payable before completion).

On the other hand, companies liable to corporation tax are usually liable to pay tax on any disposal of residential properties within 9 months and 1 day following the end of an accounting period.  As an example a disposal of a property on 1 April by a company with a March year end, will pay tax 21 months and 1 day later.  An individual based on the proposed changes will need to make a payment within 30 days.  From a cash flow perspective, this puts companies at a huge advantage to individuals.  This may be another reason for individuals to look at whether they should incorporate their existing residential portfolio.

If you require further information on the proposed changes or wish to discuss your current position to see if there are any options with regards to UK or overseas properties, than please contact Caroline Fleet or Reshma Johar on 0845 4900 509.