Capital gains tax reporting, even if there’s nothing to pay

Update

Since 5 April 2020, a UK resident who owes Capital Gains Tax (CGT) on the sale of a UK residential property is required to record and pay the CGT within 30 days of the sale. From October 27, 2021, the 30-day term gets extended to 60 days for completion dates on or after that date. The 30-day deadline only applies to disposals done before October 27, 2021.

A few landlords have contacted us to inquire whether they are required to use HMRCs new digital reporting system to make a capital gains tax disclosure, even if there is no tax due. When you sell a buy-to-let property, you must examine the capital gains tax implications and ensure that any tax due is reported and paid within 30 days (60 days w.e.f 27 October 2021) of the sale.

If you make a loss or a gain that is covered by the capital gains tax annual allowance (£12,300 in 2021/22 and locked until 5 April 2026) or a relief, no report or disclosure is necessary if you are a UK resident.Non-UK residents are required to file a report regardless of whether they owe tax or not. Suppose someone at HMRC advises you that you are not required to disclose, then obtaining confirmation in writing – or at the very least keeping a dated record of the conversation and the officers identity is necessary in case you are questioned later on. Indeed, that is worth remembering as a general rule when dealing with HMRC.

• Are there any drawbacks to disclosing?
• The 30-day Rule
• How to make a Capital gains tax disclosure?

Are there any drawbacks to disclosing?

Simply put, no. Failure to disclose capital gains tax after selling a buy-to-let property would result in a penalty and interest on any unpaid capital gains tax, so there is no point in taking the risk.Yes, selling one of your properties can take some time, and there is a lot of paperwork involved, but those are not sufficient reasons to avoid disclosing.

While we always recommend being systematic and cautious in your dealings with HMRC and seeking our advice along the way, evidence of transparency and good faith will almost certainly serve you well in the long run.

Also See: Capital Gains tax on property sold overseas

The 30-days rule (60 days rule w.e.f 27 October 2021)

If you sell a residential property from your buy-to-let portfolio, you must report and pay any capital gains tax owed within 30 days (60 days rule w.e.f 27 October 2021) of the sale. If you do not notify HMRC or us as your accountant within 30 days (60 days w.e.f 27 October 2021) of any capital gains tax liability, you will incur an initial £100 late-filing penalty. Additional penalties of £300 or 5% of the tax payable (whichever is greater) apply if you are six months late, and the same applies if you are 12 months late.

Non-residents would be subject to the late filing penalty even if they pay no tax.This applies to residential landlords in the UK and abroad who own second homes, properties that are not their primary residence, and, of course, buy-to-let properties. As a result, it is essential to be aware of this rule.

How to make a capital gains tax disclosure?

Once we receive all of the information on your property sale, we at dns compile it all before logging into HMRC’s capital gains tax on UK property portal to report and pay any capital gains tax payable within 30 days (60 days w.e.f 27 October 2021) of completion.

Non-UK residents must now declare sales of residential, commercial, or agricultural property or land in the UK using this method, even if no capital gains tax is due. We should be aware of this without the need for clarification from HMRC.

The rules for residential properties held in trust in the United Kingdom are similar to those that apply to UK residents. The same 30-day rule (60 days rule w.e.f 27 October 2021) applies, but this time we logon to the account for capital gains tax on UK property using a separate unique taxpayer reference issued by the trust registration service.

Once we have determined the amount of your gain and the amount you owe, we advise you to settle your liability using HMRC’s real-time capital gains tax service.

Avoiding a late-payment penalty by meeting the deadline is critical – and the further ahead of the deadline you are, the better, in case any questions arise.

Kindly contact us if you have any queries about the tax implications of selling one of your buy-to-let properties; however, we are not afraid to tell you that you will be walking away from an excellent long-term investment. dns accountants can advise you on potential tax implications prior to selling the property and handle all of your duties after the sale and were not hesitant to call HMRC for clarification if necessary. Contact us immediately for assistance with capital gains tax planning for your rental properties. Kindly call us on 03330 886 686, or you can also e-mail us at enquiry@dnsaccountants.co.uk.

Disclaimer :-"This article was correct at the date of publication. It is intended for general purposes only and does not constitute legal or professional advice. Independent professional advice should be sought before proceeding with any transaction".

About the author

Owais Bombaywala
Working closely with individuals and businesses to help grow their business requires a significant amount of experience and industry knowledge. Owais is BA (Hons) Accounting and Finance and Member of ACCA. Besides being a compliance champion, he specialises in Property tax planning. With over 7 years of experience in Accountancy and Tax world, our clients count on us to give them timely and up to date advise to help them make the right move. Owais works closely with some of the DNS’s most valued clients to give them the confidence they need to focus on their business. He is known for his calm nature and proactive approach. At DNS, we proud to be a modern and client centric firm. Our advise doesn’t just look at what’s best for your business moreover our aim is to help you achieve your personal goals. Away from work, he resolve family disputes and provide care and support to elderly people. He is a founding member of Human welfare organisation Hounslow.