Capital Gains Tax Residential Property Returns – Common Administrative Pitfalls

As of 6 April 2020, any Capital Gains Tax (CGT) arising from the sale of a residential property in the UK must be reported through HMRC’s online service within 60 days of the completion date of the sale, with the CGT liability also due within this period. After four years of this system being in place, several common issues have emerged:

1. Accessing Online Accounts: Many individuals face difficulties generating a Capital Gains Tax on UK property account number due to problems with electronic verification or loss of login credentials. It's crucial to set up and access your online account well in advance of the sale to avoid late filing penalties.

2. Misallocation of Payments: Using the correct payment reference is essential. Upon submitting your return, HMRC generates a unique payment reference specific to the sale, which differs from your Unique Tax Reference (UTR). Ensuring you pay to the correct account with the correct reference will help avoid delays and complications.

3. Paper Returns Delays: If you submit a paper return, expect significant delays. The payment reference is generated only after HMRC processes the return, which can take over a year. This can cause confusion with HMRC and potentially result in duplicated CGT demands.

4. Mixed-Use Properties: For properties with both commercial and residential aspects, such as a shop with an overhead flat, it’s necessary to apportion the relevant proceeds and costs for the residential part and declare the gains to HMRC within the 60-day period. This requirement is often overlooked, leading to compliance issues.

If you are considering selling a residential property and wish to discuss your situation, please contact your Tax Advisor.?

Prospective clients can reach out to Ben Haslam , our Tax Advisor, for more information.