There has been a new requirement introduced to report and pay any resultant capital gains tax within 30 days of completion of the disposal of UK residential property by UK tax residents. The regulations require the return to be filed where the disposal of residential property gives rise to a chargeable gain or allowable loss.
Where however a gain is fully covered by relief, such as principle private residence relief, there will be no requirement to file, likewise where any gain is covered by the annual exemption or a brought forward capital loss there is an exemption from the requirement to file.
These new regulations have especially impacted those within the buy to let market and second home owners. There are penalties and interest charged for late filing and payment of the capital gains tax liability. When the legislation was introduced HMRC initially waived the £100 fine for late filing provided the gain was reported and any tax due paid by the 31 July 2020.
HMRC is now issuing financial penalties for those filing capital gains tax late and such penalties have during the last 6 months of 2020 grossed HMRC over £1.3 million. In our experience of processing these returns there simply isn’t an awareness within the tax paying public of the 30 day filing requirement and in many cases conveyancing solicitors and estate agents are not alerting their clients to this new reporting regime.
HMRC have responded in relation to questions from technical press regarding the amounts issued as penalties and the lack of publicity and technology support and their spokesperson response was -
“We don’t want to collect penalties just to help customers get their tax right. That’s why we took a lenient approach to penalties to help customers' familiarise themselves with the change in rules and did not issue late filing penalties until after 31 July 2020.”
The level of penalties issued to date demonstrates the new regulations are causing issues for many who are simply not aware of these reporting requirements.
Please do not hesitate to contact Bromhead if you require further guidance.