Changes around the corner for the CGT payment window and residential property?
You’ve sold your buy-to-let property, congratulations!
The paperwork is finally signed, the chain has miraculously held together and the words ‘survey’ and ‘exchange’ now conjure up a mild feeling of anxiety and fear; but you’ve made it through and you’re ready to reap the rewards of that solid investment you made a few years back!
Now just hang on a second, before you start popping open the champagne and booking that holiday to the Seychelles, you should bear in mind that HMRC want a slice of that cash and they want it a damn sight quicker than they did before!
That’s right, from April 2020, HMRC want their cut of the gain on your property within 30 days of completion. 30 days I hear you say? Yes, that’s right, 30 days! 30 days to pull together all that information that you haven’t had to think about since the day you bought the house. Where is that completion statement? When was the date of purchase? Did I even get a statement of costs when the builder did the extension?
Tax is a minefield at the best of times but add to that a short timeframe for getting things done and it becomes even more stressful. Luckily for you, your beloved conveyancer, Mrs Anna Newport, has teamed up with her friendly neighbourhood tax advisors, Dow Schofield Watts, to fill you in on all you need to know about the upcoming changes.
So, what’s new?
Well it’s simple really, HMRC are on a mission to improve their collection of taxes – be it self-assessment or VAT, the future is real-time and digital. Historically, if a taxpayer sold a property, they would have between 10 and 22 months to report any capital gain and pay the tax due. This is just too long in the eyes of HMRC and the new rules are designed to fix that. It’s estimated that the changes to the rules will provide HMRC with a one-off tax take of £5-8bn – not a bad little earner for the Treasury some might say!
The new legislation will require taxpayers to provide the Revenue with details of any realised gains on a property within 30 days of the date the sale of their property completes; they will also need to pay the tax due at the same time. The rules are broad so if you’ve got a UK buy-to-let property that stands to make a gain on sale, you’re probably affected. Professional advice is crucial here to ensure that you maintain your cashflow and meet the tight deadline.
But how will it work in practice?
The details are a little hazy at the moment, but we do know that taxpayers will be required to complete a standalone form, reporting the gain at the time of sale. If your property has made a loss or benefits from reliefs that take it out the scope of a CGT charge, then you’re off the hook – no form required! Don’t forget you can also deduct your annual exemption when considering if you need to complete a form.
What details are actually going to be included on the form remains somewhat vague but it’s likely it will be similar in length to the SDLT forms that are now in place and it will almost certainly be completed online. You’ll no doubt need a Government Gateway account or, failing that, an agent who can complete the form and submit it online on your behalf.
Along with the ‘real-time’ return, sellers will still be required to complete their end of year tax return and report the capital gain again; tidying up all the loose ends that weren’t visible at the outset and making use of any capital losses that can help lower that tax bill. Don’t worry, you won’t be paying CGT twice, there will be a facility to deduct any payments already made from the balance due.
OK, so why can’t I just put any old figures on the return?
HMRC have acknowledged 30 days is a short window in which to pull everything together, particularly when considering a complex transaction, so it is acceptable to use reasonable estimates and apportionments where actual figures are not available. The key word here is reasonable – HMRC are unlikely to accept a finger in the air ‘guesstimate’ and a lack of care could see you end up with penalties and interest to pay along with that CGT liability. Even more likely, no submission of the return at all will attract a bigger penalty, and whilst HMRC have said they will take a soft approach to issuing penalties while people get used to the new rules, this is undoubtedly a finite window.
Great…more paperwork! So, who can help?
The team at Dow Schofield Watts are a friendly bunch, they’re not your average tax team with an ethos much like Newport Land and Law’s of wanting their clients to actually enjoy working with them. They’ve even still got most of their hair – well Kim has anyway!
Richard and Kim are more than happy to take away the trauma of filling out yet another tax form for you. Between the two of them they can provide as little or as much help as you want or need to make sure you meet your tax filing obligations and secure reliefs wherever possible. They are set up to work closely with Anna, meaning once you’ve told one of us the detail, you won’t need to go through it all again.
Fees to complete a return will vary depending on how complex your personal sale is but it’s likely to be in the region of £200 – 500 + VAT. In any case, they will always agree any costs upfront so there’s no nasty surprises later down the line.
So whilst we wait for HMRC to iron out the last few details of this huge change, keep in mind the importance of professional advice, not to mention the joy you’ll feel of not having to deal with a CGT return yourself and get in touch if you need any help or support in this area.