Residential property owners need to check their capital gains tax liability

Do you need to file a return? 

It is now over a year since the introduction of the new 30-day filing regime to report disposals of UK residential properties. HMRC have received £1.3M in late filing penalties in the last six months of 2020, suggesting that the requirement to submit a separate Capital Gains Tax UK Property Disposal Return (CGT Return) to HMRC is still not widely known.

Making a CGT return | When does it apply?

The new compliance obligation was introduced from 6 April 2020, in order to report the disposal of UK residential property, by UK residents in real-time. UK residential property includes a dwelling and ancillary buildings of the dwelling and any residential elements of mixed units. As a result, where a landlord or homeowner sells a property (including residential element of any mixed units) and there is some CGT to pay, they must file a separate CGT Return with HMRC and pay any CGT due within 30 days from the sale completing.

If the return is not submitted on time, a £100 late filing penalty applies with additional penalties accruing for continued delays. According to national statistics published by HMRC, there have been 640,140 residential property transactions in the second half of 2020, which means at least 1 in every 48 property sales receive a late filing penalty from HMRC. The ratio of properties sales attracting penalties is however likely to be higher as it is only necessary to complete a CGT return for UK residents where CGT is payable.

CGT reliefs and exemptions | Can you benefit?

We have created a flowchart to assist you in determining whether it is necessary to file a CGT Return within 30 days. Please click here to download our flowchart. However, depending on the specific circumstances, reliefs and exemptions may be available to minimise the CGT payable. Assembling the information required to calculate and complete the CGT Return can take time so it is important to start early.

If you have any questions regarding CGT or would like to discuss any other personal tax matters, please get in touch with a member of our Tax Team or your usual Azets contact.