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Changes to payment of Capital Gains Tax on property disposals

POSTED BY: Jenna Hann

18 April 18

The Revenue have just issued a consultation whereby they have extended the Capital Gains Tax (CGT) payment on account legislation which currently only applies to non-resident individuals disposing of UK property.

From April 2020 a payment on account of CGT will need to be made when residential property is sold or otherwise disposed of (e.g. gifted) by UK resident individuals.

When a UK resident individual disposes of residential property they will have to calculate any capital gains tax arising and pay this within 30 days of completion (not exchange). The gain will still need to be included on the tax return in the year that the contracts were exchanged.

It applies to UK and overseas property although there are some exceptions for overseas properties if the gains will be taxed on the remittance basis or covered by double tax relief.

In the proposal they have advised that any events that would reduce the CGT payable can be considered when calculating the CGT due but only up to until the date of the disposal for example, losses, reliefs and annual exemption etc. If the CGT is paid but at a later date it turns out that the resulting amount is higher than originally calculated, the difference becomes payable to HMRC and interest may be due.

They have also made amendments for non-residents. Previously a payment on account was not required for those who were within self-assessment or pay ATED charges. They are now looking to revise this so that regardless of whether individuals are in self assessment or not, they will be required to pay the CGT within 30 days.

The consultation runs until June so please check for a blog update once it has been finalised for any amendments. This will have an impact on any individuals holding second properties that they are considering disposing of or gifting in the near future. Currently, if an individual disposes of a property, they have between 10 and 22 months after the sale is made to pay the CGT, but from April 2020 they would only have 30 days!

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