Unheralded during the current CV-19 pandemic, the government introduced on 6 April 2020 strict new reporting requirements in relation to the disposal of residential property where a capital gain is made.
At present, reporting on capital gains is usually made in an individual’s tax return at the end of the tax year.
The new law introduces a 30-day reporting requirement from the date of completion of the ‘disposal’ (sale or gift).
Certain disposals, such as disposals between husband and wife or civil partners, are excluded on the basis that they are deemed no gain/ no loss disposals.
It will also be unnecessary to make a return where the gains on the disposal do not exceed the individual’s annual exempt amount which for 2020/2021 will be £12,300.00.
Furthermore, no return will be required where any capital gain is exempt from charge. The most obvious example of this is on the sale of an individual’s main residence which will be exempt.
Where an exemption or relief does not apply, and the gain is likely to exceed the annual exempt amount, a return must be filed within 30 days of completion and will have to be accompanied by a payment on account of the CGT which is due.
It is envisaged that a seller may not have all the relevant information available to him at the point a return is filed, so it is possible to make a reasonable estimate and to make a payment on account.
These new reporting requirements will clearly apply to sellers of second homes and buy to let properties.
Less obviously, where an individual has occupied residential property as his or her main residence, but also used parts of it for business, relief on those parts which have been used wholly or exclusively for business may be disapplied, resulting in a capital gain accruing. In those circumstances, it will be necessary to make an apportionment of any gain which has accrued on the disposal, and to make a return if the gain exceeds the individual’s annual exempt amount.
As with most tax legislation, the devil is often in the detail, but the principle is clear. If you are the owner of a second home or buy to let property or have a main residence where a significant part of the premises is used for business, you may well have to file a return under the new legislation. Failure to do so may lead to interest and penalties being payable.
If you would like any further information about the matters raised in this article or more generally relating to property and commercial matters please contact our Glyn Evans on 01934 637911 or firstname.lastname@example.org