If as a UK tax resident you are considering selling a second home or residential investment property situated in the UK or overseas, there are going to be changes to the reporting requirements which are due to come into effect from 6 April 2020.
The current position is that the disposal of a second home or residential investment property whether in the UK or overseas has to be disclosed on a self-assessment tax return for anyone already in the self-assessment system. The tax return has to be submitted to HM Revenue & Customs by 31 January following the end of the tax year in which the disposal took place (the key date is the date of exchange). If there is a capital gains tax liability to pay, this has to be settled by 31 January following the end of the tax year in which the disposal took place.
For anyone who is not already in the self-assessment system the disposal can be reported via HM Revenue & Customs’ “Real Time” Capital Gains Tax Service.
With effect from 6 April 2020, the disposal of the property (whether in the UK or overseas) has to be reported to HM Revenue & Customs within 30 days following the date of completion. In addition the payment of the capital gains tax liability also has to be made within the same timeframe. This is to bring the reporting requirements in line with the current non-resident capital gains tax regime.
If there is more than one disposal of residential property made then each sale will need to be reported separately and payment made accordingly.
The changes do not apply to disposals where the capital gain is covered in full by principal private residence relief, losses brought forward from previous years or the capital gains tax annual exemption. In the case of overseas residential property, the disposal does not need to be reported if the capital gain is going to be reported in the overseas country and double taxation relief is available or the capital gain is going to be taxed on the remittance basis.
Where the gain is only partially covered by any of the scenarios in the paragraph above then the disposal will need to be reported and any capital gains tax payable within 30 days.
These changes are going to have an impact on individuals wishing to sell residential property, not only in the additional compliance that is required but also from a cash flow perspective. Care and consideration will need to be taken when looking to sell a residential property after 6 April 2020 and advice should be sought well in advance of a disposal taking place.
Author: Anthony Barron, Tax Manager, Plus Accounting
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