A chargeable gain may arise on the sale, disposal or transfer of a residential property if that property has not been the seller’s only or main home throughout the period of ownership. Here we are looking at investment property, such as a buy-to-let, a holiday let, or a second home. Any UK resident, trust or estate who sells or gifts UK residential property at a gain is required to calculate, report and pay any capital gains tax (CGT) due within 60 days of completion of the sale. Companies are not subject to these rules.
Non-UK residents are required to report all disposals of UK land (not just disposals of residential property), whether or not a capital gain is realised. This requirement extends to disposals of shares in ‘property-rich’ entities. An entity is ‘property rich’ if, at the time of the disposal, 75% or more of the value of the asset disposed of derives directly or indirectly from UK land (whether commercial or residential).
Reporting and Paying
Reports must be made online via the UK Property Reporting Service, a standalone service only accessed on a specific page on the GOV.UK website. A Government Gateway user ID and password are needed to set up a ‘Capital Gains on UK property account’. There is the facility to submit a paper return if the taxpayer is ‘digitally excluded’ – a specific form can only be obtained from HMRC direct.
Where the individual is also within self-assessment, it will be necessary to report the disposal twice – once within 60 days and again on the relevant self-assessment (SA) return. The property account can also be used to make payment and view previous returns submitted. The amount payable must be the best estimate of the tax due at the date of sale. Losses realised previously in the tax year or brought forward can be taken into account, as can the annual exempt amount, if this has not been used against other gains.
Amendments and Refunds
Amendments to the property return can only be made in specific circumstances (e.g. the estimate of the individual’s income changes so the rate of CGT which applies is changed or the value of any figure which has been estimated or apportioned becomes known). For those individuals who also complete a SA return, final adjustments are made on that form.
Because sometimes the amounts to be declared may not be finalised by the 60 days, it is possible that a repayment may arise especially if losses are realised on later disposals in the tax year. Such repayments (termed ‘initial overpayments’) can be offset against other taxes payable on completion of the SA return. If after offset an overpayment remains then, once the SA return has been submitted, the taxpayer will have to ring HMRC to arrange repayment.
If the taxpayer disagrees with HMRC’s calculation, they will be asked to supply supporting evidence such as a calculation/computation. The taxpayer does not have to supply the additional information but it would be in their interests to do so. In contrast, the paper return requests evidence such as ‘calculations, invoices, receipts or valuations’ in all cases.
It is important that the property return is completed before the SA return even if the property return is submitted late, as the Property Reporting Service does not permit property returns to be filed after submission of the SA return.