How to avoid 60-day capital gains tax (‘CGT’) reporting on UK residential property
28th April 2023
Posted in Articles, Capital Gains Tax by Tom Minnikin
The issue
On 6 April 2020 HMRC introduced a new reporting requirement for individuals disposing of UK residential property. This involved any CGT liability having to be reported via a standalone return and paid within 30 days of completion. This time limit was then later revised to 60 days for disposals with completion dates on or after 27 October 2021.
This means that the CGT is payable in advance of the ordinary due date for other capital gains (31 January following the tax year of disposal). These new reporting requirements accelerate payments of tax to HMRC to the disadvantage of the taxpayer. They also have the additional administrative burden of having to complete two returns (i.e. their normal self-assessment tax return and the new 60-day return).
It does not always have to be like this…………………
A single return with cash flow advantages
If the disposal takes place towards the end of the tax year, there is an opportunity to avoid the extra 60-day reporting and, as a bonus, get almost 10 months of extra time to pay the tax. This is because if the taxpayer completes their self-assessment tax return within the 60-day reporting period, they are no longer required to submit the additional return and (importantly) this also means that they do not have to pay the tax within 60 days.
Example
Phil disposed of his buy-to-let property on 28 March 2023 giving rise to a capital gain of £50,000 (after deducting his Annual Exempt Amount of £12,300 for the 22/23 tax year). Phil is a higher rate taxpayer and therefore subject to CGT at 28% i.e. he will have a CGT liability of £14,000.
Under the new reporting requirements, Phil would have to report this gain and pay the tax of £14,000 within 60 days i.e. by 27 May 2023.
However, if Phil was to submit his self-assessment tax return for the 2022/23 tax year ahead of 27 May 2023, he would not need to complete the 60-day return and the due date for the tax of £14,000 would be pushed back to 31 January 2024.
There is however an exception where this treatment would not apply. If losses are made after the disposal (eg on 3 April in the above example) then the 60-day return and payment would still be required even if the return was submitted within the 60-day time limit. Individuals should therefore plan the timing of losses wherever possible.
Forbes Dawson’s view
In practice, these circumstances may only apply to disposals of UK residential properties arising from around mid-February to 5 April each year. Although 60 days prior to 6 April (the first day a tax return can be submitted) is either 5 or 6 February it may take a few days after the tax year end to get the tax return prepared and filed.
However, as the 60-day deadline only starts from the date of completion, this does provide an incentive to push back the date on disposals that would otherwise occur earlier to obtain the additional 10 months to pay the tax.
Importantly, tax is triggered by exchange whereas the 60-day reporting period is triggered by completion and so it may be possible to delay the obligation by exchanging and then delaying completion.
