Payment of CGT on sale of UK residential property: COVID-19 Update
With effect from 6 April, a new deadline was imposed for paying CGT following the disposal of UK residential property which does not qualify for main residence relief. Individuals and Trustees have 30 days from completion to pay any CGT due and to file the new on-line return. UK residents do not need to report transactions where no tax is due (unlike non-residents).
There were legitimate concerns that the new regime has not been very well publicised but together with the extraordinary COVID-19 situation, to the extent that any sales are still going ahead, HMRC have confirmed that they will concede more time is required to adjust to this new regime. As such HMRC will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020.
This means transactions completed, by UK residents, between 6 April and 30 June 2020 and reported up to 31 July 2020.
Currently 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. Although HMRC have indicated that they will take a flexible approach where payment is difficult due to the COVID-19 crisis.
Given, it is likely that sellers may receive a substantial amount of cash from the sale they would therefore be expected to pay the tax due from the proceeds. Nevertheless, 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 is a dry tax charge, where are no actual sale proceeds) or if the vendor is required to realise cash to invest in their business in response to the Covid-19 crisis. We would be able to contact HMRC on a client’s behalf to discuss assistance on a case specific basis.