ARE YOU DISPOSING OF A RESIDENTIAL PROPERTY
There has been a significant change to the tax reporting and payment requirements for disposals of UK residential properties from 6 April 2020. See below for our quick-fire Q&A on the new rules.
Q. WHAT IS THE HEADLINE CHANGE?
A. Disposals of any direct and indirect interests in UK residential property or land on or after 6 April 2020, now need to be reported and tax paid
within 30 days, rather than under self-assessment.
Q. DOES THIS INCLUDE MY OWN HOME?
A. Reporting gis only required by UK residents where there is a capital gains tax (CGT) liability. Disposals of your own home, where it has been
your main residence throughout the ownership period, should be covered by principal private residence relief and will therefore not need to be reported. If there have been periods when you have not lived there, let out your home or used part of it as a business, however, reporting may be required.
Q. WHEN DO I NEED TO REPORT AND PAY THE TAX?
A. If you have disposed of a UK residential property on or after 6 April 2020 (i.e. exchange of contracts) then you will need to report and pay the tax due (as a payment on account) within 30 days of completion of the sale.
Q. WHAT INFORMATION WILL I NEED TO REPORT?
A. In order to be able to calculate the capital gain due, information such as costs of acquisition enhancement expenditure incurred, periods of
ownership whilst living in the property etc. will be required. If you are looking to engage a professional adviser to help file the return, giving as much notice as possible will be advisable for them to help you to file on time.
Q. WHAT IF I FILE LATE?
A. HMRC has announced an initial ‘soft landing’ period with no late filing penalties issued for late returns received on or up to 31 July 2020. Interest will continue to accrue, however, on any late paid tax. After this date, the 30-day deadline will need to be met in order to avoid a
late filing penalty.
SDLT DEADLINE RELAXED FOR MAIN RESIDENCE DISPOSALS
A 3% SDLT surcharge was introduced in April 2016 for the purchase of second homes. This charge also applies where a new main residence is purchased but where your previous home is not sold at the same time It is, however, possible to claw back this surcharge if the old property is disposed of within three years.
With the coronavirus pandemic freezing the property market for a while, and with an ongoing impact on property disposals, HMRC released updated guidance to extend this three-year time limit in certain circumstances.
Under the new guidance, new homes purchased on or after 1 January 2017 may still be eligible for a refund after the three-year window has expired if:
- there are exceptional circumstances beyond their control from disposing of their old home within the three-year time limit; and
- the old home is sold as soon as reasonably possible.
The guidance states that exceptional circumstances may include being prevented from selling the property due to government guidance during
the coronavirus pandemic.
HMRC has said that they will consider each case separately and it is only possible to put in a request for exceptional circumstances at the point
a refund has been requested and once your old home has been sold.
Note that the currently position for sales of property for Scotland and Wales is different. Please contact us if you would like further information on this.
TIME TO PAY ARRANGEMENTS
With the COVID-19 pandemic having cash flow implications for many businesses and individuals, HMRC introduced some formal tax payment
deferrals. This included deferring quarterly VAT payments for periods up to 30 June 2020 as well as the second self-assessment payment due on 31 July 2020 for individuals and trusts.
Although no formal deferrals have been announced for other taxes such as PAYE, NIC and corporation tax, HMRC are being more receptive to agreeing time to pay arrangements or short-term deferrals for these liabilities.
For deferred payments of PAYE and NIC, no interest or penalties will be charged. If, however, you have also made a claim under the coronavirus job retention scheme for furloughed employees, you will still be required to pay the related PAYE and NICs received as part of the grant to HMRC.
For deferred payments of corporation tax, late payment interest will continue to be charged but no penalties will be raised providing the corporation tax return is filed on time. In order to help with cashflow further, HMRC has also published guidance confirming that, in exceptional cases, they may agree to an early loss carry back claim based on anticipated losses for the current period which could result in a repayment of tax. Under normal circumstances it would generally not be possible to do this until the current accounting period has ended.