New Payment Rules for CGT on Residential Properties

Capital gains tax liability for residential properties

Capital gains tax never fails to introduce changes that keep accounting experts on their toes. Following the publication of a government consultation back in April 2018, the latest change to the rules surrounded payments on capital gains tax liability for residential properties. This consultation closed in on June 6, with HMRC publishing its response – as well as draft legislation – one month later.

So, what are these changes to capital gains tax payment rules? In essence, the new rules – which are set to be introduced in the 2018/19 Finance Bill – introduce payments on account in relation to capital gains made on sales or disposals of residential property.

What exactly does this mean?

In the past, capital gains tax liability was to be paid by January 31 following the end of the tax year in which the property was disposed of. The new plans, however, will replace this with the requirement that, following a disposal of a residential property – including a sale – a payment on account relating to the anticipated tax due now needs to be made within 30 days of the disposal.

In addition, should further property gains be accrued during the same tax year, a similar calculation will need to be performed. This is where things become complicated. The tax payable on account for these additional properties will be the difference between the new calculation and the amount already paid. Furthermore, should there be a loss following a property disposal, you could well recover a repayment equal to the amount less than previously paid.

It goes without saying that calculating the necessary repayments is a difficult and time-consuming process. Now, with a 30-day limit set to be introduced, the need to be able to accurately calculate your capital gains tax liability quickly is even more crucial. In such an instance, it’s therefore advisable to liaise with an experienced tax accountant who will undoubtedly be able to help you in determining your liability accurately and fast.

When do the changes take place?

This particular change is set to come into play on April 6, 2020. In the meantime, those looking to secure profit from the sale of any residential properties and who wish to defer payment of the tax until the following January, now is the time to sell.

For everyone else, it’s imperative that keeping a thorough and accurate record of all transactions relating to property (and other assets) takes priority, as does finding a reliable and efficient accountant to help provide the support you need.

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