Due to the time delay that there used to be between the disposal of UK property and the payment of any related tax, HMRC introduced new rules. Prior to these new rules a disposal could be made on (say) 1 May 2021 but the associated tax would not be due until 31 Jan 2023, some 21 months later.
These new rules were broadly introduced in Apr 2015 for non-residents and in Apr 2020 for UK residents.
The effect of these new rules was to require taxpayers to file an in-year property return and to pay any tax due within 30 days. This 30 days has now been extended to 60 days.
HMRC’s concerns were probably mainly driven by the desire to receive tax payments sooner but there was also some concerns with regards to the loss of data or the ability to reconcile various data received by HMRC.
Residents only need to prepare this return if there is tax to pay. However, non-residents must file regardless and HMRC will charge a penalty if this return and the associated payment is filed or paid late.
It is useful to note that the 60 day deadline starts from the date of completion and not exchange. However the tax due is still based on the exchange date.
It is also useful to note that no in-year return is required if the associated self-assessment is filed within 60 days of the completion on the property.
Due to the recent reductions in the annual exemption for capital gains tax i.e. from £12,000 to £6,000 in 2023/2024 and to £3,000 in 2024/2025, it is likely that more individuals will be required to file property returns.
When completing the return, various numbers will be required e.g. acquisitions cost (or possibly the market value at the time of acquisition under certain circumstances), capital improvement costs (not repairs or general maintenance), incidental costs of acquisition and disposal (solicitor, estate agent, stamp duty etc) and disposal proceeds.
An oddity of the return is that a capital losses can’t be used against any gain on the property if it happens after the property disposal (even if it is in the same tax year). Normally, capital losses are netted out against gains in the same tax year and then any excess is carried forward. However, the in-year property return will not allow a later loss to be netted off. This can still be done in the year-end self-assessment but not in the property in-year return. Therefore, a repayment may be due.
Also, the rate at which CGT is paid depends on total income. Any gains falling inside the basic rate band will be taxed at 10%/18% and the balance at 20%/28%. Total income may not be known at the time of filing the in-year return and therefore this may also lead to a true-up when it comes to the year-end return.
Declaimer: The above is intended to only be a brief and broad overview of the topic as at the date of writing and is for general information use only. It is in no way intended to be taken as advice or acted upon. We strongly recommend that you obtain appropriate independent professional advice before you take any actions or make any decisions in this area.
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