CGT payment window on sale of UK residential property: COVID-19 Update

From 6 April, there is a new deadline for paying capital gains tax following the disposal of UK residential property which does not qualify for main residence relief.

UK resident individuals and Trustees have 30 days from completion to pay the amount due and to return the gain using a new on-line form. However UK residents do not need to report transactions where no tax is due (unlike non-residents). HMRC have issued a comprehensive fact sheet on the new regime including a series of Q&As which can be found here.

In response to concerns that the new regime has not been very well publicised and in light of the current situation, to the extent that sales are still going ahead, HMRC have confirmed that they are allowing a period of time to adjust: they will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020. For UK residents, this means transactions completed between 6 April and 30 June 2020 and reported up to 31 July 2020. Transactions completed from 1 July 2020 onwards will receive a late filing penalty if they are not reported within 30 calendar days. In all cases, the guidance suggests that interest will still accrue if the tax remains unpaid after 30 days.

In addition, however, HMRC have indicated that they will take a flexible approach where payment is difficult due to the COVID-19 crisis. Many sellers will have received a substantial amount of money from the sale and would be expected to pay the tax due from the proceeds but HMRC do acknowledge that there may be situations where payment is difficult, for instance where the disposal of the property was by way of gift (so there are no actual sale proceeds) or if the vendor needs to find money to invest in their business in response to the crisis. There is general advice about help available and the message seems to be if you contact HMRC they may be able to assist on a case specific basis.

As always with on-line payments, the seller or the agent will need to register with HMRC first and sufficient time should be allowed to enable this to be completed and the information returned before the deadline. Trustees disposing of a UK residential property can also use the new on-line system but personal representatives disposing of the deceased’s property will need to file a paper return. HMRC have updated their customer CGT guidance on-line with advice on the new regime.