HMRC to speed up capital gains tax payments for residential property sales

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A payment on account of capital gains tax will need to be made when a residential property is sold from April 2020.

Payment will be due within 30 days of completion and the seller will have to submit a “payment on account” return at the same time.

The changes affect those selling a second home or rental property. They will not apply to disposals covered by principal private residence relief. However, if only some of the gain is covered, a payment on account and return will need to be made for the taxable part.

The changes also apply to overseas property sales. So, a payment on account will need to be calculated when a UK resident sells a residential property abroad. That is unless the gain on the disposal will also be taxed in that country and double taxation relief is available or the gain would be taxed on the remittance basis.

HMRC has published a consultation on how the amount payable will be calculated, the administration of those payments, and changes to the existing payment on account system for non-residents who sell UK residential property. The closing date for comments is 6 June 2018.

Simon Boxall, Tax Director at Ward Williams says:

“Capital Gains Tax is currently collected from UK residents by 31 January following the end of the tax year. The government appears eager to collect CGT as early as possible and the proposals would match the 30-day payment timeframe for non-residents disposing of UK residential property. There is, however, going to be an additional administrative burden on individuals, and a significant cash-flow disadvantage compared to the current system. I will be interested to hear how HMRC will cope with reconciling the system at the end of the year when the disposal is also reported on a self-assessment tax return.”

Ward Williams has a team that specialises in the needs of landlords. To find out more please visit our Property section

If you wish to discuss the above, please contact Simon Boxall at simon.boxall@wardwilliams.co.uk

 

About the author

Simon is the Tax Director at Ward Williams and has more than 20 years of practical experience working in the tax profession.

 

Specialising in personal tax, Simon qualified as a Tax Technician in 2007, having been awarded with the Ivison medal for attaining the highest mark in the Personal Taxation paper in 2006.

 

As department head, Simon oversees the tax team across the Ward Williams group, whilst managing a diverse portfolio of clients including high net worth individuals, doctors, directors of owner managed businesses, partnerships and sole traders.

simon.boxall@wardwilliams.co.uk

01895 236335