Changes to CGT


Loom­ing on the hori­zon are some most un­wel­come changes in the way that UK tax­pay­ers will have to report and pay for cap­i­tal gains tax (CGT) on res­i­den­tial prop­er­ties in the fu­ture. (These changes will not ap­ply to UK res­i­dent com­pa­nies and these rules al­ready ex­ist for non-res­i­dents).

At present, a cap­i­tal gain made by a UK res­i­dent in­di­vid­ual is re­ported through the self­assess­ment regime. This means that, if an in­di­vid­ual dis­poses of a prop­erty any­where, say, be­tween April 6, 2018 and April 5, 2019 it will be no­ti­fied on his or her 2018-19 tax re­turn – which does not need sub­mit­ting un­til Jan­uary 31, 2020 (and the tax is due on the same day).

The cur­rent sys­tem means that it can be any­where be­tween 10 and al­most 22 months be­fore the CGT is re­turned and set­tled.

The gov­ern­ment’s in­ten­tion is that within 30 days of the res­i­den­tial prop­erty’s dis­posal, the ben­e­fi­cial own­ers (who are UK res­i­dents) must prepare a pro­vi­sional CGT re­turn and make a pro­vi­sional pay­ment on ac­count of the CGT ul­ti­mately to be due. This will be in ad­di­tion to the ex­ist­ing CGT as­pects of self-as­sess­ment. In other words, tax­pay­ers will still have to fill in the CGT pages of their self­assess­ment tax re­turns and pay any out­stand­ing CGT by Jan­uary 31 af­ter the tax year in ques­tion.

The new regime will ap­ply for dis­pos­als made on or af­ter April 6, 2020 – so just over a year be­fore these changes come in.

You may well ask: ‘Why do we have to report on the same thing twice?’ Well , the rea­son is be­cause ev­ery tax year is dealt with in iso­la­tion and it is not un­til the end of the year that you can truly ag­gre­gate all in­come, gains, losses, de­duc­tions and re­liefs to for­mu­late a prop­erly rec­on­ciled and fi­nal tax po­si­tion.

Hav­ing to report and make a pro­vi­sional pay­ment just 30 days af­ter dis­posal seems far too short a re­port­ing win­dow for tax­pay­ers and their ad­vis­ers who have the un­en­vi­able job of putting to­gether the pro­vi­sional com­pu­ta­tions in­clud­ing de­tails such as orig­i­nal cost, in­ci­den­tal costs on ac­qui­si­tion, en­hance­ments etc, which is dif­fi­cult – es­pe­cially if the prop­erty has been owned for many years. Ex­emp­tions to pro­vi­sional re­port­ing do ap­ply where there is no CGT to pay: 1 When there is a ‘no-gain/noloss’ trans­ac­tion such as be­tween spouses and civil part­ners. 2 Where the gain is covered by pri­vate res­i­dence re­lief.

3 Where any losses or an­nual ex­emp­tion are suf­fi­cient to cover the gain.

Other im­per­fec­tions are that there is no fa­cil­ity to re­duce CGT pay­ments on ac­count (that is, get some of the pro­vi­sional CGT back) if the tax­payer makes a cap­i­tal loss later in the tax year – clearly the gov­ern­ment is not too con­cerned about in­con­ve­nienc­ing tax­pay­ers here. In essence, this is all about get­ting the same money more quickly into the hands of the Ex­che­quer! What’s new?

ABOVE: There are some big changes to Cap­i­tal Gains Tax

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