30 day cgt returns

Don’t get caught out by the new 30 day CGT returns reporting requirement for residential property disposals.

The residential property market is currently booming, with buyers trying to make the most of the reduced Stamp Duty Land Tax (SDLT) rates which come to an end on 31 March 2021.

For those selling residential property, it is important that they consider what their obligations might be in respect of reporting the disposal to HMRC and paying across any Capital Gain Tax (CGT) due.

If the property has been lived in as the owner’s main residence for the entire period of ownership then there will be no CGT to pay and no reporting requirements, as the gain will be covered in full by main residence relief.

However, where the property has not always been the main residence, for example a buy-to-let property or a property used as a second home, then it is likely that a gain will arise. In April 2020 a new regime was introduced which requires those disposing of residential property to file a CGT return within 30 days of the disposal. In addition, any CGT payable must also be paid over within 30 days.

Since the introduction of self assessment back in 1997, UK resident individuals have been required to report disposals of property on their annual tax return and pay over any capital gains tax (CGT) due by 31 January following the end of the tax year. The new regime has not been particularly well publicised, with HMRC efforts being focused on Covid support packages from around the same time as it was introduced. We are seeing lots of these returns which have been missed, as individuals have not been advised by estate agents or solicitors of their reporting obligations. Often when they come to us the return is already late and late filing penalties are accruing, together with late payment interest.

The new return is in addition to the existing tax return and so the disposal must be reported again when the individual completes their normal self assessment tax return at the end of the tax year. However, if they would not normally complete a self assessment return, there is no need to register and file a return just for the purpose of reporting the property disposal.

The new rules apply to disposals of UK residential property by UK resident individuals. Non-UK resident individuals have been required to file similar returns on the disposal of UK residential property under these strict time limits since April 2015, but the new rules also now extend this to any disposal of UK land or property by a non-UK resident.

In year reporting brings with it many complications, such as deciding which rate of CGT will apply based on your expected income for the year, dealing with multiple disposals in the same tax year, utilisation of capital losses, and claiming relief which may not be quantifiable until after the event (such as an EIS investment).

If you are intending to sell a residential property, it is essential that you get in touch with us as soon as possible so that we can ensure all the necessary information is available to file the return, and calculate the CGT payable within the 30 day time frame. Now would be a good time to make sure the acquisition history, including any required valuations, and usage of your residential properties is documented to reduce the administrative burden on a future disposal. If you have any questions about the new regime and what it means for you then please get in touch.

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