Be aware of gains tax changes

“Any gain made would not trigger a CGI liability”

Before April 6, where a property forming part of an estate was sold, resulting in a gain triggering a Capital Gains Tax (CGT) liability, the individuals or trustees who manage the estate had a long deadline for reporting and making payment of the tax to HMRC.

This deadline was January 31 following the end of the tax year of the disposal of the property, which meant there could be a period of up to 21 months before payment was due.

These rules have now changed. For UK residents who make disposals of UK residential property from April 6, a return and payment of CGT is due within 30 days of “completion” of the sale.

Completion refers to the conclusion of missives, not final settlement, so it is possible the seller may need to pay the tax before receiving any settlement funds.

This new rule equally applies to gifts as well as sales, so could still be triggered by the gift of a residential property to a family member, for example. Gifts of property into a trust, however, may qualify for hold-over relief.

This new deadline means if you own a landed estate and are disposing of residential property that triggers a CGT liability, you will have the shorter timeframe of 30 days in which to both report and make payment of the tax.

A further change to taxation rules that applies from April 6 this year relates to Principal Private Residence Relief (PRR).

This applies where an estate owner occupies a property on the estate as their main residence and has done so throughout their ownership.

Any gain made on disposal of the property would not trigger a CGT liability, as it would for any gain during periods of non-occupation. It is instead covered by PRR. In such a case, no return needs to be submitted or payment made.

Where the owner has occupied the property as their main residence at some stage in the past but not at the time of sale, a final period of ownership can qualify for this relief.

The purpose is to give individuals a CGT-free period in which to sell a property once they have given up occupation.

This period of deemed occupation was formerly 18 months but has now been reduced to nine months.

This is an extremely tight deadline and will need swift action to market and sell a property.

There has also been a change to the relief available where the owner’s main residence has been let at some point during the period of ownership but is now being sold or transferred in some way. The relief covers up to a maximum of £40,000 of any gain attributable to the rental period.

Lettings relief now only applies where the owner lived alongside their tenants during the periods of let, which will mean that many instances of letting will no longer be covered.

These changes mean many more owners of landed estates who are selling property will have to file returns and pay CGT on account. They will also have a much shorter timeframe, with the introduction of the 30-day period for returns and payment.

PROPERTY: Sales of part of an estate resulting in a CGI liability will now result in a much shorter window of 30 days to report and make payment of any taxes due