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UK taxpayers to be given special warning of 30-day CGT payment deadline for property disposals

Monday, 24 June, 2019

HMRC is taking special care to ensure that taxpayers are aware of new rules taking effect in April 2020, under which the capital gains tax (CGT) bill on residential property disposals has to be paid within 30 days of completion.

Currently, CGT due on property disposals does not have to be reported or paid until the deadline for submitting a self-assessment form, which can be up to 22 months after the disposal took place. The changes mainly affect those selling a second home or rental property on which private residence relief is not available. They will apply to UK residential properties, even where property is gifted for no consideration.

Although two years' grace has been allowed between the announcement and the implementation of the new time-window, it is likely that many taxpayers, especially holiday home owners and small-scale landlords, will not be aware of them in time. HMRC wants to avoid a repeat of the recent cases in which late-filing penalties imposed on non-resident sellers of UK property have been overturned at tribunal because the reporting regime had not been sufficiently well publicised.

It has now published a report of research conducted to find out how best it can warn taxpayers of the new 30-day payment window before it affects them.

It found a significant number of ‘one-off’ taxpayers, individuals liable for CGT on one property either as a result of recently selling an inherited property or because they had rented out a property in the UK. They were least likely to be informed about CGT, because many did not use formal support, such as agents, for guidance on CGT, and those who did use agents did so on an informal or occasional basis and only to answer a specific question based on their personal CGT circumstances.

Solicitors and accountants told HMRC that they do inform customers about CGT payment deadlines, but that some one-off disposal taxpayers had missed deadlines as a result of not being clear about their responsibilities. Even HMRC's own website presents navigation difficulties, and the complexity of CGT means that relevant information such as payment deadlines may be easily missed, the report acknowledges.

Another issue was encountered by solicitors taking on new clients, who discovered that their client was not aware of the requirement to pay CGT and had failed to pay when disposing of previous properties. This was most common among taxpayers without representation, who would then face the dilemma of potential penalties and fines for late payments.

HMRC's use of language confused some of the respondents. The rules say that a 'payment on account' has to be made within the 30-day period. Some taxpayers, even experienced customers, thought this meant a part payment, rather than a payment of the entire sum due, with the possibility of corrections later on when HMRC checked the calculations.

All respondents to the survey believed that the policy change should be communicated as soon as possible, given that the property disposal process can sometimes be lengthy and could involve complex tax discussions with intermediaries.

Sources

Comments

Submitted by Lisa Macpherson on Tue, 25/06/2019 - 07:18

"They will apply to both UK and overseas residential properties..." - but will they? The legislation clearly states that it applies to disposals of UK land.

Part 1, Sch 2, FA 2019 - Returns and Payments on Account: Disposals of UK Land etc
Disposals to which Schedule applies - Para 1
(1) This Schedule applies for the purposes of capital gains tax to —
(a) Any direct or indirect disposal of UK land which meets the non-residence condition (whether or not a gain accrues) and which is made on or after 6 April 2019, and
(b) Any other direct disposal of UK land on which a residential property gain accrues and which is made on or after 6 April 2020,
but this Schedule does not apply to excluded disposals.

Para 2
(2) A disposal is “any other direct disposal of UK land on which a residential property gain accrues” if the disposal is a disposal on which a residential property gain accrues where —
(a) The land in question is in the UK, and [...]

Submitted by Helen Swire on Tue, 25/06/2019 - 13:38

Hi Lisa,

Many thanks for flagging this: we have updated the piece to reflect the legislation correctly.

Best wishes,
Helen Swire
News Editor