Selling a property – don’t miss the 60-day capital gains tax reporting deadline

The reduction in the main rate of capital gains tax for residential properties from 28% to 24% from this tax year may be an incentive for many individuals to sell their properties. For individuals selling or otherwise disposing of their UK property, you need to comply with HMRC reporting and tax payment obligations outside the self-assessment system.

These rules also apply to trusts and estates that have reporting and tax payment obligations under this regime.

When do the reporting obligations apply?

This depends on whether the disposal is made by a UK resident or non-UK resident.

UK residents

A UK resident will have a reporting obligation if they realise a capital gain on the disposal of a UK residential property and capital gains tax is payable on that capital gain. An example would be an individual selling a second home, a buy-to-let property or a property which has not been occupied as their main residence throughout the period of ownership. Another example would be if an individual gives their second home to their child, and the market value of the property is more than the price the individual paid on the original acquisition of the property.

There are no reporting obligations if a capital gain realised is exempt or there is no capital gains tax to pay; this would apply, for instance, if an individual is selling a property which has been occupied as their main residence throughout the period of ownership.

Non-UK residents

These rules apply to all disposals of UK land and property (residential and non-residential), whether there is any capital gains tax due. It also applies to ‘indirect disposals’, i.e. disposals of shares in ‘UK property-rich’ companies – broadly this includes companies that derive at least 75% of their value from UK land and property.

What are the reporting and tax payment obligations?

There is a requirement to submit capital gains tax on a UK property return and pay the capital gains tax due within 60 days of the completion date of the transfer of the property.  There is a limited exception to the requirement to file the capital gains tax on a UK property return where the individual files a self-assessment tax return before the 60-day deadline.

Where there is an obligation for a self-assessment tax return to be filed, the capital gain should also be reported on the self-assessment tax return, even if it has already been reported on a capital gains tax on UK property return.

What happens if you fail to meet your reporting and payment obligations?

A £100 fixed penalty is imposed by HMRC if you do not file your return within 60 days of completing the disposal of the property. There are then daily penalties of £10 per day once the return is three months late with a maximum of £900 chargeable.  There are further tax-geared penalties of £300 or 5% of the tax due (whichever is higher) if you file the return more than six or 12 months late.

Interest is charged on any late payments of tax and late payment penalties also apply.

How we can help

We can advise you on your tax payment and filing obligations. Our advice also includes consideration of any reliefs or deductions that may reduce your tax liabilities. We can also assist you with the preparing and filing any returns due by the required deadlines.

If you would like any further information, please get in touch with Nilam Chawla or any member of our private client team.