If as a UK tax resident you are considering selling a second home or residential investment property situated in the UK, you need to be aware of changes to the reporting requirements which came into effect from 6 April 2020.
The position pre-6 April 2020 was that the disposal of a second home or residential investment property in the UK had to be disclosed on a self-assessment tax return for anyone already in the self-assessment system. The tax return had 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 was a capital gains tax liability to pay, this had to be settled by 31 January following the end of the tax year in which the disposal took place.
With effect from 6 April 2020, the disposal of the UK property had to be reported to HM Revenue & Customs within 30 days following the date of completion. Since 27 October 2021, the 30-day deadline has been extended to 60 days from the date of completion.
In addition, the payment of the capital gains tax liability must also be made within the same timeframe of 60 days from the date of completion. If there is more than one disposal of residential property in a tax year, 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, other capital losses either brought forward or incurred in the same tax year before completion, or the capital gains tax annual exemption. Where the gain is only partially covered by any of these scenarios then the disposal needs to be reported and any capital gains tax paid within 60 days if interest and penalties are to be avoided.
These rules affect 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 need to be taken when selling a residential property and advice should be sought well in advance of a disposal taking place.
Author: Tax Team, Plus Accounting
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Date Published: 6 March 2019
Last Updated: 08 August 2022