Detailed guidance on how to use the real time CGT service when disposing of residential properties
Since 6 April 2020, UK residents within the charge to capital gains tax (CGT) on direct disposals on residential properties are required to complete a return, and payment of CGT must be paid within 60 days (30 days for completions between 6 April 2020 and 26 October 2021) following the completion day for UK residential land (including buildings) when there is a charge to CGT.
These reporting obligations apply to individuals, personal representatives, trustees and partnerships but not to limited companies within a charge to corporation tax on capital gains.
Failing to meet deadlines for submission and payment will trigger penalties. This is a significant change for people who would previously only have had to enter the details on their self-assessment return and pay the tax due in line with the self-assessment deadlines. You should have early conversations with your property clients in order to prepare them for the above steps and to avoid any unnecessary delays in filing and incurring penalties.
It should be noted that not all disposals are within the scope of this new regime. Disposals of an individual’s principal private residence (PPR) that do not produce a gain due to the main residence relief provisions within TCGA 1992 s222 et seq do not need to be reported. Furthermore, the legislation also specifically excludes the following disposals:
HMRC’s online reporting of CGT service can be accessed via an individual’s or an organisation’s Government Gateway ID. Authorised tax agents (ie accountants) can use their agent services account (ASA) to report and manage their client’s CGT return. Accountants who already have an Agent Services Account (for MTD) do not need to create a new one.
As an agent, before you can offer this service to your clients, you need to ask them to:
You will need to sign into your agent services account then select ‘ask a client to authorise you’. After you’ve been authorised, you’ll need to:
The self-assessed calculation of the amount payable on account takes into consideration unused losses brought forward or in the same tax year and the person’s annual exempt amount (individual £12,300 – 2022/23), whereas any anticipated losses on future disposals cannot be taken into account. The rate of tax for individuals is determined after making a reasonable estimate of the amount of taxable income for the year.
If your client is already within self-assessment and has to complete a return, you will need to ensure that the gain is also included on their self-assessment tax return.
Once the provisional calculation has been submitted and the tax paid, it cannot be reduced (for example, because your client made a capital loss later in the year) until the client submits their self-assessment return.
CGT on residential property and carried interest is payable at rates of 18% and 28% as opposed to the normal capital gains tax rate of 10% and 20% respectively for basic and higher rate taxpayers.
Non-residents are already required to file a capital gains tax return within 30 days of the completion for all direct or indirect disposals of UK land (both residential and commercial) which meet the non-residence condition. The return is required irrespective of whether or not a gain accrues on the disposal.
All other CGT disposals are normally reported on the seller’s self-assessment return submitted from ten to 22 months after the disposal takes place.