Property: what's new?
Like the extension to the Stamp Duty Land Tax holiday to 30 June 2021 in England and Northern Ireland; the similar announcement in Wales, and absence of one in Scotland, some changes make headlines. But others escape the media spotlight.
Capital gains tax (CGT) 30-day reporting is one of these. The new regime comes into play for any disposals of UK residential property since 6 April 2020, where there is CGT to pay. In such cases, tax must be calculated, reported and paid within 30 days of completion, rather than taking place within the self assessment tax return cycle as before. Relevant disposals in the year to 5 April 2021 should therefore already have been reported.
Reporting is done online, through HMRC's UK Property Reporting Service. We would be happy to report recent disposals for you, as your agents. Unfortunately, HMRC's system is not entirely hands-free, and requires you to set up a UK Property Account on gov.uk to authorise us to report for you. This account, it should be noted, is a completely different entity from the Personal Tax Account.
30-day reporting impacts you only if you have CGT to pay. Disposal of a main residence, for most people, will be covered by the CGT relief known as private residence relief (PRR). PRR applies if the property has been occupied as your main residence throughout the entire period of ownership. Scenarios where a CGT liability could arise, and hence a need for a 30-day return, include disposal of a buy-to-let property; a holiday home; property you have inherited; property you've never lived in; or have lived in for just some of the time you've owned it.
Recent changes have restricted availability of PRR, potentially bringing more property transactions within scope of 30-day reporting. Letting relief, for example, used to give relief up to £40,000 (up to £80,000 for property in joint names) on the sale of property that had, at some point, been used as the main residence, but had also been let as residential accommodation. For disposals from 6 April 2020, the relief is considerably restricted, available only where you live in the property at the same time that it is let out. Rules relating to property transfer between spouses have also changed. The recipient spouse now also receives the period of ownership and history of their property use, and this can have knock-on consequences for PRR. So, too, can change on rules giving automatic relief for the final months of ownership.
Please do talk to us in advance if you are planning property transactions, particularly if you have doubts as to whether full PRR will apply.