Capital Gains Tax review
Capital Gains Tax (CGT) is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that is increased in value. Since 6 April 2020, UK residents, individuals, trustees, or personal representatives with a gain arising on the disposal of UK residential property (on which there is Capital Gains Tax to be paid) must report it via the new UK Property tax return within 30 days of completion.
The latest data from HMRC suggests as many as one-third of CGT returns were filed outside of 30 days and in the last six months of 2020, late filing penalties totalling £1,311,300 were issued since the 30-day window was introduced.
Until April 2020 UK taxpayers were only required to declare Capital Gains Tax (CGT) on an annual self-assessment tax return. Since then, taxpayers disposing of a UK residential property are required to calculate, report and pay any applicable CGT within 30 days of completion of the sale.
Recommendation three of the report proposes the UK Government adopts one of the two changes to improve the system:
- Extend the reporting and payment deadline from 30 to 60 days, to give taxpayers more time to fulfil their tax obligations. The OTS considers that 30 days is a challenging deadline for many taxpayers, for whom disposing of property is an infrequent experience.
- Mandate property professionals such as estate agents, conveyancers or auctioneers to distribute an HMRC-approved standard information pack to customers whenever a residential property is placed onto the market or instructions given to a conveyancer. This could help taxpayers proactively plan and gather required information in advance of the sale and therefore providing plenty of time in advance of the 30-day period starting.
The OCT acknowledges that careful consideration would need to be given to whether information should be provided by estate agents, conveyancers, or both. The recommendations will now be considered by the UK Government.