Report residential property sales in 60 days

Since 6 April 2020 the way in which UK property sales are reported to HM Revenue & Customs has changed dramatically. Those disposing of property need to be aware of the new reporting requirements, which come with a very short deadline and payment date, together with changes to how any capital gain arising is calculated.

Whilst these changes have been in place for a few years, it is reported that around 20% of returns are still being filed late.  The most likely reason for delays is lack of awareness that the reporting regime has changed.

Since April 2015, non-resident individuals and other entities have been required to complete a Non-Resident Capital Gains Tax (NRCGT) return within 60 days of selling UK residential property. From 6 April 2020 this regime was extended to the sale of all UK residential property, subject to a small number of exceptions. Therefore, a much wider group of taxpayers is now required to comply with this tight submission deadline, which also sees the introduction of a payment on account of any Capital Gains Tax arising.

How property sales are reported

For property sales which exchange on or after 27 October 2021, the transaction must be reported to HMRC by the person making the disposal using a separate Capital Gains Tax return. The deadline for this return and associated tax payment is 60 days following the sale completion.

This new system of reporting is in addition to the existing Self-Assessment Tax Return regime. Therefore, a disposer who already completes an annual tax return will find themselves reporting the same property disposal to HMRC on more than one occasion.

Common misunderstanding arises where more than person owns the property that is being sold.  Each property owner must file a return with HMRC – the reporting is per taxpayer and not per property. This is often the case for couples selling a property and it is advisable to check the property title deeds to establish who is listed as owner(s) and make the relevant notification to HMRC within 60 days.

The Capital Gains Tax return filing also applies to Trusts and Estates disposing of UK residential properties. There are some known technical issues surrounding the reporting, including online registrations of such entities which may cause delays.

Penalties for late filing

If disclosure is not made to HMRC within 60 days of completion, late filing penalties will be charged. The penalty can reach £1,600 per return, if filed more than 12 months late. HMRC will also charge interest if the tax is not paid on time.

Having access to Stamp Duty forms, HMRC may prompt taxpayers directly via written correspondence asking to disclose the property sale.

The Capital Gains Tax Return is still required even if the sale of the property has already been reported on the tax return and submitted to HMRC via self-assessment.

Taxpayers are advised to ensure that they involve their accountant or tax adviser as early as possible when undertaking property sales to ensure they are made aware of the reporting requirements and so that they may understand and plan any tax payments due.

This post was written by Michael Morter a tax specialist at Price Bailey. If you would like to know more about anything discussed in this post then please contact Michael using the form below.