HMRC have published a new consultation “Capital Gains Tax: Payment window for residential property gains” which looks at reducing the CGT payment time for residential property to 30 days from April 2020.
Capital Gains Tax (CGT) is currently payable by the self-assessment tax payment date of 31 January following the tax year in which the disposal takes place with the gain being reported on the self-assessment tax return. Non-residents disposing of UK residential property and filing self-assessment returns may delay payment of the CGT due until the 31 January deadline.
The proposal is that from April 2020, a payment on account of CGT will have to be made when a residential property is sold or otherwise disposed of, such as by gift and a special return will have to be filed for each disposal.
- Will only apply to dwellings meaning, care homes and purpose-built student accommodation will be exempt.
- The payment will be credited against the person’s income tax and CGT liability for the tax year. Taxpayers already in self-assessment will still need to include the gain in their annual tax return.
- Payment will be due within 30 days of the completion of the disposal.
- A special ‘payment on account’ return confirming the disposal and the amount payable will have to be filed within 30 days.
- Each disposal in the year is dealt with separately. Where a loss is realised later in the tax year, repayments will be generated for any CGT on gains realised earlier in the year.
- Interest will be charged on late payments and penalties charged on late payment on account returns in line with existing late filing penalty scales.
- Payments on account and returns will not be required for disposals fully covered by Private Residence Relief (PRR), where there is a loss and where no gain/no loss treatment applies.
- Non-residents filing self-assessment returns will no longer be able to delay payment of the CGT as the 30 day payment window will apply.
The changes would affect those disposing of:
- Second homes
- Rental properties
- Properties not qualifying or not fully qualifying for PRR, for example due to exclusive business use or letting
Responses are invited to
Question 1: Are there areas where the proposed scheme for UK residents could be improved to make it easier for taxpayers to comply?
Question 2: Does the proposed treatment of losses on disposals of residential property and disposals of other assets strike the right balance between simplicity and fairness? If not, what alternative approach would you propose? In responding, it would be useful to receive estimates of numbers of people and amount of CGT potentially affected in any year and details of any one-off costs.
Question 3: Are there areas where the scheme for non-residents could be improved to make it easier for taxpayers to comply? In responding, it would be useful to receive estimates of numbers of people and amount of CGT potentially affected in any year and details of any one-off costs.
Question 4: Do you have comments on the provisional table of impacts?
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