From April 2020 we have the next round of changes which extend the current regulations to also apply to disposals of UK residential property by UK residents. By far this will have the biggest impact for our clients and will dramatically increase the volume of such reportable transactions.

Under the current self assessment system, dependent on timing of sale, capital gains tax is due anywhere from 10 months to 22 months after the disposal. These new regulations expedite the payment of capital gains tax in the case of disposal of residential property.

From 6 April 2020 where capital gains tax is due on a residential property disposal:

• A return will need to be filed; and
• The capital gains tax due must be paid within 30 days of date of completion of the property sale transaction

This is a major change to the administration of capital gains tax for UK residents and whilst the policy intention may be simple in outline, as ever, the detailed legislation is much more complex.

The regulations will require a return to be filed with H M Revenue & Customs where disposal of residential property gives rise to a chargeable gain or allowable loss. Where however a gain is fully covered by a relief such as principal private residence relief, there will be no requirement to file a UK land return. Therefore dealing with conveyancing for clients just selling their main ‘home’ should, provided they meet the full requirements of principal private residence relief, not require a return.

A return will also not be required where the gain is covered by the annual exemption or a brought forward capital loss, but in any other case the UK resident individual must complete a return and pay any capital gains tax due within 30 days of completion of the property disposal.

Undoubtedly this will significantly impact those within the buy to let market, second home owners and other property disposals where perhaps there has been a historic mixed use history of the property.

Dealing with capital gain computations is not always straightforward, particularly in terms of establishing the history relating to such property disposals. The return will need to include a calculation of the ‘notional’ tax arising and therefore in addition to the capital gain history, a detailed understanding of the individual’s income tax position will also be required to establish an accurate resultant capital gain. Bromhead are available to provide you with such advice. Our recommendation to clients in view of the new 30 day deadline is liaise with us at the point you decide to market the property. This will then give us more time to extract the history and produce the computation so you can also budget for the resultant tax accordingly for cash flow purposes.

Potentially over the next few weeks there may be a flurry of vendors pushing for completion of their property transactions before 5 April 2020 to avoid the impact of the new regulations.

If you have any queries on this please contact the director or client manager you deal with at Bromhead who will be pleased to assist, or get in touch with us below.