CGT fees on residential property

An interesting development in the area of Capital Gains Tax is the proposed introduction in the Finance Bill 2019. The Bill will implement a requirement for UK residents to pay CGT upon selling residential properties within 30 days of sale where there is a liability. For non-UK residents selling residential property, this is coming into effect from 6th April 2019.

Currently non-UK residents do not have to pay CGT when selling non-residential property but those rules are changing to come in line with the new CGT rules on residential property. The NRCGT levy has been in existence since 2015 and these new rules are just widening its cope. There have been numerous tribunal cases where non-residents have been penalised with no knowledge of the rules.

The generic rule being introduced from 6th April 2020 will be that the CGT must be paid within 30 days upon disposal of residential property and a payment on account made simultaneously. Whilst calculating the CGT, they will take into account the individuals annual exempt amount and their unused losses. Therefore the tax is decided based on a reasonable estimate of the amount of taxable income for the year. Following consultation, the legislation has been altered in order to permit reasonable valuations which then compute the gain.

For sales by UK residents, the new reporting and payment requirements won’t apply where the capital gain on the sale of the property is not chargeable to CGT, for example if the gain is covered by the private residence relief. The same rules do not apply if the property being sold is covered by a CGT double taxation agreement (usually non-UK residential property).