All individuals, trusts and estates which dispose of UK residential property, should be aware of their potential obligation to file a UK Capital Gains Tax (CGT) return.

Gains must be reported, and CGT paid within 60 days after disposing of the property. The filing window was previously 30 days but was extended to 60 days from the end of October last year.

Despite this CGT return being mandatory since April 2020, we are still speaking to individuals on a regular basis who were not aware of the requirement to file a return. They then face potential late filing penalties and late payment interest when the return is subsequently filed.

Background

Historically, property disposals have always been reported after the end of the tax year in which they took place, as part of the annual self-assessment tax return. This CGT return is a move towards reporting and paying tax liabilities earlier.

Non-UK residents have been required to file a CGT return for every disposal of UK residential property since April 2015. The scope was widened to include UK residents disposing of UK residential property from April 2020. At the same time, the reporting requirement for non-UK residents was widened to include all UK property (not just residential property).

No return is required for UK residents disposing of UK residential property where there is no tax to pay. This might be because, for example, the gain is covered by main residence relief, the annual exemption (currently £12,300), or the property was sold at a loss. Conversely, non-UK residents must file returns for disposals of UK property even where there is no liability arising.

Interaction with the self-assessment tax return

If the individual is within the self-assessment system, they must also report the disposal on their tax return after the end of the tax year. They will receive credit against their overall tax liability for the CGT already paid in that year. If the individual is not within self-assessment, then there is no requirement to register to complete a tax return just to report the gain.

The CGT returns must be completed online using a government gateway account. If individuals are unable to set this up, they can call HMRC and ask them to issue a paper return instead.

Non compliance

Unless individuals are advised by professionals involved at the time of disposal that they may be required to report under this regime, it is likely that they will be unaware of their reporting obligations.

Accountants tend to become involved after the transaction has taken place and so it is up to solicitors and estate agents to make sure their clients are informed.

We can help individuals with meeting their reporting requirements, be this before or after the filing deadline. We are also able to advise on all aspects of Capital Gains Tax so please do get in touch.