Background
Since April 2020, taxpayers that have a Capital Gains Tax (CGT) liability from the disposal of UK residential property have been required to complete a “CGT on UK Residential Property Return” in order to declare and pay the tax due within 60 days of completion.
This reporting requirement means that upon a potential disposal, taxpayers must assess their CGT position as soon as possible to ensure the relevant records can be obtained and the return can be prepared and filed within the timeframe.
It appears that these returns are not always being completed and hence HM Revenue & Customs (“HMRC”) are taking action.
Detail
Although CGT returns have been a legal requirement for just over five years, it is still common for taxpayers to be unaware that the additional return is required and we see many cases where this is not recognised until the time comes to complete the usual self-assessment tax return. This is usually past the 60-day deadline and therefore penalties and interest are being levied against the taxpayer.
HMRC have acknowledged that this is a common occurrence and have announced a new initiative attempting to help taxpayers fulfil their obligations before they miss the deadline. HMRC will now be reviewing transactions that they believe may require a CGT return and writing to taxpayers before the 60 day deadline offering links to guidance explaining the circumstances in which a return would be required.
Upon receipt of these letters, taxpayers should firstly assess whether a CGT liability does arise. If so, the return should be completed and if not, they should reply to HMRC using the contact details in the letter confirming that it is not required.
Although this initiative is intended to help avoid late filing, HMRC have confirmed that only a limited number of taxpayers will be contacted and therefore we would strongly urge taxpayers to continue to assess the CGT position whenever they dispose of any residential property. HMRC not sending the letter would not be deemed a reasonable excuse for not filing.
If you believe you may be required to report a disposal or if you may have missed a reporting deadline, please speak to your usual contact or our Tax Director, Jenny Marks.
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