Capital Gains Tax payment deadline reduced from up to 22 months to just 30 days – will you be affected?
Capital Gains Tax (CGT), put simply, is the tax which becomes due on the profit made of a disposal of an asset and/or property which is not your sole place of residence. You are taxed only on the profit made and not the sum received. Individuals have a CGT allowance (Annual Exempt Amount) of £12,000 per year, meaning that they are taxed on the profit made on anything above this and the rate of tax depends on your taxable income.
The current payment deadline for CGT due on residential property disposals of up to 22 months is due to be significantly reduced to just 30 days from completion, which is planned to take effect in April 2020. HMRC are said to be taking considerable care to make those affected aware of the new changes, as back in 2015 where the same payment deadline was introduced to non-resident sellers of UK property, it was argued that HMRC were not attentive in publicising such changes, causing late-filing penalties to be imposed on those taxpayers affected. This of course opened the floodgates for cases taken to tribunal, which resulted in a vast majority of penalty fees being reduced and even overturned, due to their lack of publication. Those who are most likely to be affected by this change, are people selling a second home or rental property, which is not classed as their primary residence and therefore they cannot claim private residence relief. Despite a 2 year time frame being granted from announcement of the changes to implementation, many of those taxpayers affected, such as holiday home owners and landlords, will not learn of the changes in time.
Having learnt from the previous chaos, HMRC recently published a report of their findings, which suggested that those who have recently disposed of an inherited property or had rented out a property in the UK, were considered ‘one-off’ taxpayers and were most likely to miss being informed of the new payment requirements. A solution to this would of course be to suggest seeking advice from an agent/legal advisor where necessary, when taking part in disposals of property in the UK, as they are able to give you up to date advice on your rights and responsibilities as a taxpayer and not just for CGT. Referring back to those who have recently inherited a property, this usually follows from the death of a loved one and of course is an added stress. The language and terminology used by HMRC can at times be confusing, especially for those who are considered ‘one-off’ taxpayers and therefore not familiar with the legal jargon. Their website is also difficult for most users to navigate and this therefore is a further hurdle for those affected by CGT. Contacting HMRC is also rather difficult, especially at busy times of the year such as during the months leading to the financial year end; another reason to seek legal advice. ]