Chartered Accountants & Registered Auditors
+44 (0) 28 90325050 |
www.muldoon-accountants.co.uk TAX CHANGES FOR PROPERTY OWNERS
Homeowners When a UK taxpayer sells their main home, the sale doesn’t normally attract Capital Gains Tax (“CGT”). This is due to the availability of Principal Private Residence relief (“PPR”). Under the current rules, this relief covers the final 18 months’ ownership of the taxpayer’s main home even if they have moved out for any reason. This final exemption period will be reduced to 9 months from April 2020.
In addition, from April 2020 the government will reform lettings relief so that it only applies in circumstances where the owner of the property is in shared occupancy with the tenant. Given that lettings relief up to £40,000 could be claimed by homeowners who had typically moved out and let their former home, this change will restrict the circumstances in which it is available.
UK resident property
investors From April 2020 a shorter reporting regime will commence. UK residents who realize a gain on residential property (located worldwide), will have to calculate the CGT due, make a submission to HMRC and a payment on account (“POA”) - all within 30 days of completion, unless you are registered for self-assessment when the tax payment can be deferred until 31 January following the end of the tax year.
The return and POA will be needed whether the property is sold or gifted. Please note, a return will not be required where there is no CGT due, for example where the gains are covered by PPR.
Non-UK resident property investors Historically, CGT has always had a
territorial limit and generally non-UK residents have been outside the scope of UK CGT on any gains realized on the sale of a UK property. However, from April 2015 any gains realized on the disposal of UK residential property by a non-UK resident is subject to CGT.
From April 2019, disposals of any UK property by a non-UK resident will be subject to UK CGT, with the exception of companies who will be subject to Corporation Tax (“CT”) instead.
Also, all non-UK residents will also be taxable on “indirect disposals” of UK land. The indirect disposal rules apply where a person makes a disposal of an “entity” that derives 75% or more of its gross asset value from UK land. There will be an exemption for investors who hold a less than 25% interest.
How the above gains are reported to HMRC will depend on CGT or CT
applies. For CGT, the reporting requirement remains unchanged – a CGT submission and payment within 30 days, unless you are registered with self- assessment where the tax payment can be deferred until 31 January following the end of the tax year. For gains subject to CT, CT will be payable within 9 months and 1 day of the accounting period end with the company tax return due within 12 months of the accounting period end.
If there is anything in this article that affects you, or somebody you know, please speak to Steven McVitty for independent professional advice.
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