Capital Gains Tax (CGT) reporting on UK Property and Land Sales - Update

From 6 April 2020, those liable to CGT on a residential property or land disposal were required to send a standalone online return to HMRC and make a payment on account of the tax due within 30 days of completion of the sale.

On Budget Day (October 27th 2021) the Chancellor announced an extension to the 30 day filing & payment timescale for Property & Land sales to 60 days. Any returns filed late are subject to penalties with interest accruing on late payment.

The obligation applies to UK residential property transactions where:

• the date of disposal (usually the date of exchange) is on or after 6 April 2020 and

• CGT is due. UK residents do not need to report transactions where no tax is due because of the availability of reliefs (eg, private residence relief, annual exempt amount).

• Non-UK residents continue to need to report transactions even if no tax is due. They are also required to report sales of non-residential property and land.

Residential property

For the provisions to apply, at the time of disposal the land must have either included a dwelling or subsisted for the benefit of a dwelling. A dwelling is a residential property used or suitable for use as a dwelling or which is in the process of being constructed or adapted for use as a dwelling.

Institutional buildings are not included and these consist of residential accommodation for school pupils or members of the armed forces; residential accommodation for children or those needing personal care because of old age, disability, drug or alcohol dependency or mental disorder; hospitals and hospices; prisons; hotels; other institutions, and student accommodation with 15 or more bedrooms.

Gardens, grounds and outbuildings also count as residential property and this may include an area larger than the standard half a hectare which would qualify for private residence relief. Where the use of the land has been mixed or used only for part of the time, then a just and reasonable apportionment should be made to apportion part of the gain as a residential property disposal. If a building becomes temporarily unsuitable for use as a dwelling, then this still counts as residential property. This applies unless it resulted from accidental damage to the building and it was unsuitable for use as a dwelling for at least 90 consecutive days.

Disposals

The legislation captures all disposals, with the exception of disposals at no gain/no loss (eg, between spouses) and the grant of a lease to an unconnected person for no premium.

Reporting and payment

If at completion it is ‘reasonable’ to assume that a relief for CGT will apply (such as private residence relief, holdover relief or rollover relief) then the gain can be calculated on that basis and no return needs to be made provided that no tax is due.

There is no requirement to make a return where a loss arises. However, where a return is completed the loss can then be set against a further UK residential property disposal in the year where a gain has been made.

A UK land return will need to be made for each UK residential property disposal, unless the completions occur on the same day, in which case they can all be reported on the same return.

A self assessment tax return will continue to be required in the normal way (ie, the disposal must be reported on the CGT pages). If the liability differs to the CGT return filed, the original return is required to be amended.

More Detailed Advice

If you think that these new rules might apply to you, please do get in touch with our tax team well before the completion date (or indeed before you make the decision to sell) so that we can help prepare the calculations and paperwork for you. We may also be able to assist with planning to mitigate the tax liability but would need to do this prior to exchange.

Additional Information for Non-UK residents

Calculate your gain or loss for UK residential property There are 3 ways to calculate your gain or loss:

• using the market value at 5 April 2015

• by working out the gain over the whole period (the date the property was acquired to the date it was disposed of) and then working out what the gain since 5 April 2015 is as a proportion – known as time apportionment

• by working out the gain over the whole period

Calculate your gain or loss for UK non-residential property or land and indirect disposals. Work out your gain or loss by either:

• rebasing using the market value at 5 April 2019 (this is the default method)

• working out the gain over the whole period