Share this content
14

C. G. T. Residential property after 5th April 2020

C. G.T. on sale of residential property after 5th. April 2020

Didn't find your answer?

I have aclient who is about to sell a let residentail property after 5th. april 2020. I see the normal rule that contract date is the point of sale has now changed just for this type of transaction to completion. date.  What is anybody's opinion on a scenario where the contact date is prior to 6th. April 2020 but the completion date is after the 5th. April 2020.  I would think the contact date is still the applicable one as it is prior to the new rules coming in.

Secondly if this sale takes place close to 6th April 2020 it may not be possible to calculate my client's tax laibility accurately before the 30 days runs out.  It looks then as if I have to apply a best estimate and then adjust after this when I know the other income.  Are there any penalties or interest payable then, even if I can prove that the estimate was reasonable.

As usual this is a tax grabbing scheme dreamed up by civil servants who have no idea how much time it can take the self-employed to complete records for the year for perfectly justified reasons such as establishing bad debts. etc.  

 

 

 

Replies (14)

Please login or register to join the discussion.

Scooby
By gainsborough
17th Mar 2020 12:22

The gov.uk guidance states that the report and payment won't have to be made where a legally binding contract for the sale was made before 6 April 2o20.

Rather unhelpfully, it says that guidance for using the new online service will be available from April 2020. With everything going on at the moment, who knows whether that will actually happen, but at the moment I would say, yes, your best estimate may have to do at that stage.

Thanks (0)
avatar
By Wanderer
17th Mar 2020 12:53

James wrote:

I have aclient who is about to sell a let residentail property after 5th. april 2020. I see the normal rule that contract date is the point of sale has now changed just for this type of transaction to completion. date. 

Not if I've read it properly?
Thanks (0)
avatar
By richard thomas
17th Mar 2020 13:09

What makes you think the normal rule that contract date determines when a disposal takes place has "now" changed. It is s 28 TCGA 1992 and was certainly in the 1979 Act as s 27. Thus you are right that a pre-6 April 2020 contract has the effect that the new return rules do not apply. This is what it also says on the HMRC Press Release on the gov.uk website, though I would recommend looking at the actual law (which as an accountant you presumable have access to) rather than gov.uk.

What the HMRC release does not mention is that the calculation of the tax is of the notional CGT that would be due in relation to that disposal and that reasonable estimates are acceptable (this is the law - para 14(4) Sch 2 FA 2019). And you don't have to adjust unless later events make your notional CGT figure excessive and you want a repayment.

Schedule 24 FA 2007 (penalties for incorrect returns) is made to apply to a return but penalties will only become due if the client or you failed to take reasonable care in making the estimates or knowingly made a false return. HMRC have the burden of proof in a dispute over Sch 24 so I doubt if there will be very much scrutiny of returns for what is a PoA.

Your last para may be true, but what has establishing a bad debt in a business got to do with a notional CGT calculation?

Thanks (0)
Replying to richard thomas:
avatar
By James
17th Mar 2020 15:50

First of all this on the accounts I had just realised that my query was wrong here and was about to edit my original question when I saw your reply I was getting my years mixed up I was thinking 19/20 accounts where it should be 20/21 so no chance of calculating the actual income early in the tax year apologies for the confusion.

I am not sure of your comment about the change according to an article on the I.CA.E.W. website completion date is now the disposal date for disposals after 6th April 2020 for rented residential properties only, so if correct surely a significant change.

Thanks (0)
Replying to James:
avatar
By Wanderer
17th Mar 2020 16:09

James wrote:

I am not sure of your comment about the change according to an article on the I.CA.E.W. website completion date is now the disposal date for disposals after 6th April 2020 for rented residential properties only, so if correct surely a significant change.

Please provide a link or text as that's not my understanding nor Tim Good's.
Thanks (0)
avatar
By pauld
17th Mar 2020 13:15

The date of exchange is the tax point for capital gains and so the new rules will not apply if exchange prior to 6 April 2020 and completion is after.

Thanks (0)
avatar
By fawltybasil2575
17th Mar 2020 14:46

@ James (OP).

The posts above (by richardthomas and others) will hopefully allay some or all of your fears.

Whilst you state that the sale contract date will be after 5 April 2020, you then postulate a sale on or before 5 April 2020.

If perchance the client is able to arrange for the sale contract date to be on or before 5 April 2020, this would almost certainly be advantageous in terms of CASH FLOW. In such event the CGT due date would be 31 January 2021, whereas (if the sale contract date is shortly after 5 April 2020) then the (albeit estimated) due date would be around 8 months sooner (30 days after the completion date).

There could of course conceivably be other factors (eg other Capital Gains in 2019/20 or 2010/21) which might render a sale contract date after 5 April 2020 advantageous, but in most cases a sale on or before 5 April 2020 would be beneficial.

The other advantage of a sale on or before 5 April 2020 is of course that one would not have to carry out the exercise of estimating the CGT liability (albeit I believe that in practice it would be extremely unlikely, as richardthomas has explained, that HMRC would seek to challenge the validity of the estimated CGT payment, and would only do so if the amount so paid were substantially under-estimated).

Basil.

Thanks (0)
Scooby
By gainsborough
17th Mar 2020 14:22

Yes, I think the OP might be confusing the tax point (still date of exchange) with the submission date for the form and tax which is 30 days from completion.

Thanks (1)
Replying to gainsborough:
avatar
By James
17th Mar 2020 15:56

I see your point but surely rather technical as the estimated C.G.T. still still has to be paid 30 days after completion date not contract date.

Thanks (0)
By Paul D Utherone
17th Mar 2020 14:53

If contract date is before 6/4/2020 the gain belongs on the 19-20 tax return and is not within the new reporting requirements. In that case completion post 5/4/2020 doesn't come into it, unless I suppose the contract were in some way conditional and did not become unconditional until after 5/4/2020

Thanks (0)
My photo
By Matrix
17th Mar 2020 16:15

I doubt we will get much experience filling in these forms in the coming months, there will be too much uncertainty in the housing market.

Thanks (0)
Replying to Matrix:
avatar
By tim hervey
23rd Mar 2020 14:29

Matrix wrote:

I doubt we will get much experience filling in these forms in the coming months, there will be too much uncertainty in the housing market.


With self-isolation and social-distancing it is unlikely properties can be viewed by prospective buyers. If they do actually view the property and want to proceed to purchase, will there be anybody to do the valuation, surveyor's report, conveyancing etc?! It will be interesting to see how the new 'final 9 months' rules operate from 06/04/2020 in the current circumstances.
Thanks (0)
By slipknot08
18th Mar 2020 08:27

HMRC has confirmed that for contract dates before 6 April, the old regime will apply and the gain will be on the 2019/20 SA return. Only where contract & completion are both on or after 6 April will the new 30 day deadline apply (and you still have to show the gain on the SA return).

Thanks (0)
By northernmonkey
18th Mar 2020 09:26

It's quite clear on the HMRC website - if unconditional contracts exchanged pre-6/4/20 the new rules don't apply.

https://www.gov.uk/government/news/get-ready-for-changes-to-capital-gain...

Thanks (0)
Share this content

Related posts