A change in capital gains tax legislation relating to the sale of UK residential property by a UK resident (individual or trustee) takes effect as from 6 April 2020. This change was announced by the Government in the recent budget and had in mind the impact of COVID-19. It is not, therefore, expected that there will be any reliefs or exemptions introduced to the legislation. This legislation has the ability to generate immediate revenue for HM Revenue & Customs in these difficult times.
When will the legislation apply?
Upon sale by UK residents of UK residential property, including;
- buy-to-let properties;
- second properties not claimed by the seller as principal private residence;
- inherited properties; and
- holiday homes.
It applies to all sales where contracts are exchanged on or after 6 April 2020.
When does the legislation not apply?
- A legally binding contract for the sale was made before 6 April 2020;
- The property qualifies for full private residence relief (this is suggesting that it will not apply to properties benefiting from partial relief);
- The sale or disposal was made to a spouse or civil partner (this is because the gain is neutralised);
- The gains (including any other chargeable residential property gains in the same tax year) are within the client’s tax free allowance;
- The property was sold for a loss;
- The property is situated outside the UK; or
- The seller is non-UK resident.
The application of the Legislation
Upon the sale of a UK residential property to which the legislation applies, there is a tax chargeable gain crystallised, such tax payable by the seller. Prior to this change in legislation, it was acceptable for the client to declare the gain within their self-assessment tax return in accordance with the self-assessment deadlines. The change in legislation provides that the seller will need to declare the gain within 30 days of completion on a ‘residential property return’ and the tax will need to be paid within the same period.
Brecher LLP can assist in the conveyancing for the sale of the property and can act on your behalf to comply with HM Revenue & Customs’ revised compliance to declare the sale.
This update is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this update may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.