The requirement for UK residents to pay tax and report gains on UK residential property came in during the first covid lockdown and, because the news was full of coronavirus reporting at the time, this change did not seem to get much publicity. Before 27 October 2021 the timescale was just 30 days but this now this is 60 days. If a UK resident disposes of UK residential property on which capital gains tax is due, they must calculate the gain, report it and pay the tax they owe within 60 days of completion. For those who are not UK resident, similar rules have applied since April 2015, although non-residents must report even if no tax is due. Since April 2019 non-residents have also had an obligation to report all their UK land disposals, not just residential property.
The legislation mostly affect landlords and those with a second home. Some trusts and estates are also affected where the beneficiary does not qualify for full private residence relief. This could happen say if someone moved out of a property following a relationship breakdown or because the property was acquired from the estate of a deceased person. In those situations the trustee or executors might also need to report.
These gains must be reported and the resulting tax paid via a UK Property Account online service. Shepherd Partnership can do the reporting for you once you have created a UK Property Account and given us the reference number. For digitally excluded taxpayers there is a paper form which we can also request on behalf of our clients.
The system sits outside of self-assessment. As tax has to be paid in year, an estimate of the taxpayer’s income has to be made in order to work out an approximate amount of the Capital Gains Tax (CGT) to pay. One of the most common problems we find with the system is its interaction with self-assessment as it effectively means reporting twice. The in-year 60-day report will a best estimate of the tax due at that time. After the end of the tax year details of the disposal must go on the return of self-assessment taxpayers which then finalises the tax position. A common problem has been where the taxpayer had provisionally paid too much tax, as there has previously been no easy method of recovering the excess tax paid. We are pleased to be able to report that we understand HMRC have made improvements for 2021/22. and will now allow in-year overpayments to be offset firstly against any other CGT liabilities in the year and then other income tax and Class 4 liabilities shown on the self-assessment return. Where a tax repayment is still due after these liabilities have been offset, unfortunately this will not be repaid automatically. If that situation we will need to contact HMRC to arrange a refund.
Where possible we would urge you to create a UK property account for us to use to report any gains as paper forms take much longer to process, are harder to amend, and you will need to wait for a payment reference to be issued before you can settle your liability.
Your UK Property Account is separate from HMRC’s main record of you. Therefore, if you have a UK property account and change address, you will need to log in to update your record on it as a separate exercise.
If you need any help with Capital Gains Tax, please get in touch as we are here to help.