Rishi Sunak’s Autumn Budget will come as good news for individuals and trustees selling UK residential property. In his speech on 27 October 2021, the Chancellor announced provisions which will help to alleviate the compliance burden on those selling chargeable residential property by doubling the time available to report and pay Capital Gains Tax (CGT) from 30 to 60 days after completion.
The measure is designed to ensure that taxpayers do have sufficient time to report and pay CGT. It will apply to both UK and non UK tax residents.
UK Tax Residents
The previous rules, which took effect from 6 April 2020, meant that taxpayers disposing of UK residential property where a Capital Gains Tax (CGT) charge arose, would need to file a standalone CGT return to HMRC within 30 days and arrange payment of the estimated tax liability at the same time. This represented a significant change to the normal reporting and payment deadlines for taxpayers. It also introduced a supplementary CGT penalty system.
18 months into this 30-day filing regime and the government has now taken on board the very clear recommendations from the Office of Tax Simplification (OTS), to increase the filing and payment deadline to 60 days after completion.
This will come as a welcome relief to those selling second homes or residential investment properties, such as Buy-To-Let properties or serviced accommodation. Calculating the correct gains can be difficult for a variety of reasons and 30 days was an exceptionally tight filing timeframe, particularly if an individual was initially unaware of the need to file.
Returns are only required for UK residents where a CGT charge arises, so anyone selling their only or main residence is unlikely to be caught by the reporting rules, provided they qualify for Private Residence Relief.
The 60-day period will begin from the date of completion of sale.
Non UK Tax Residents
Non UK residents will also benefit from the increase from 30 to 60 days. The 30 day reporting obligation for Non Resident Capital Gains Tax (NRCGT) was first introduced for sales of Residential property in the Finance Act 2015, well before the equivalent rules for residents. The rules were widely criticised at the time for being difficult for non UK residents to adhere to and not sufficiently publicised.
The extension of reporting required for UK residents disposing of residential property, then led to the creation of HMRC’s widely criticised “UK Property Account” which was set up to act as a digital means of filing all required capital gains tax returns for UK property sales made. Both resident and non UK resident taxpayers must now use this same platform to file their CGT return. There have been significant operational issues associated with this HMRC platform, which has perhaps added weight to the OTS recommendations to extend the filing window.
The main difference between UK Resident and non UK resident sellers, is that non UK residents must report all UK residential property disposals within this new 60 day timeframe, regardless of whether there is a capital gain or loss. This would include the disposal of an individual’s UK home, even if any gain is covered by Private Residence Relief.
Additionally, non UK residents are also expected to report sales of commercial land or property within the 60 day timeframe (previously 30 days).
This announcement, extending the filing deadline 60 days will definitely be welcomed by all those affected, both resident and non UK resident, as well as their UK advisers.