HMRC updates on Capital Gains Tax

HMRC have introduced new rules under the Finance Act 2019 stating that when UK resident individuals dispose of residential property on or after 6 April 2020, they must report the gain and pay the Capital Gains Tax within 30 days of the disposal. Failure to comply will trigger a penalty and incur interest on unpaid CGT. These rules also apply to trustees of trusts for UK residents that dispose of UK residential property.

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive.

Should a disposal have occurred prior to 6 April 2020, capital gains should continue to be reported in personal tax returns for the year in which the disposal takes place or is deemed to take place.

The rules state that the disposals apply to main residences, holiday homes, residential lettings and inherited homes that are not used as main residences throughout the period of ownership.

It should be noted under the Finance Act 2019 that the 30-day deadline is not applicable if any of the following apply:

• The legally binding sale contract was made before 6 April 2020.
• Principal private residence relief is available.
• The disposal was made to a spouse or civil partner.
• The capital gain (together with any other chargeable residential property gains in the same tax year) are within the annual CGT exempt amount.
• The property was sold at a loss.
• The property is outside the UK.

HMRC will launch a new online facility for reporting and paying CGT in April 2020, which can be used by UK residents making disposals from 6 April 2020.

For more information, contact Alex Bowers, Solicitor and Partner at Coole Bevis LLP on 01273 722532 or by email at alex.bowers@coolebevisllp.com.