From 6 April 2020 there were changes which affect everyone who sells or gives away residential property after this date. Primarily you should be aware that unless the property was your main residence throughout the time you owned it, you will have to file a tax return with HMRC within 30 days of completion and may have to pay capital gains tax at that time: much earlier than has been the case until now.
To put this another way, main residence relief may not be fully available if you have lived away from home for a time, have more than half a hectare of land, have a second home, or run a business from home and you may be affected.
At Mercer & Hole we support our clients, we want to ensure that you are aware that you could have a tax obligation and work with you to ensure you meet the deadline. 30 days is a short period of time in which to assemble all the information you will need and there will be penalties for late filing, so it is wise to ensure that you have the following details to hand:
• Date of acquisition, cost of purchase and other costs such as legal fees or stamp duty land tax.
• Dates in which you lived in the property
• Dates where you shared it with a lodger
• Improvement expenses such as a new kitchen or extension (with invoices)
• Date and proceeds of sale. Costs of sale such as legal fees or agency fees.
There are detailed rules on the way in which the accelerated capital gains tax will interact with your usual annual tax return, and we will be happy to discuss your situation with you further.
The rules apply to all property sales; not just main homes so if you sell or give away a property which has been rented out throughout, a return will be needed. Less obviously, if you dispose of shares in a company where the value derives from real property you can also be caught. This last category can also include the sale of REITs which are a common component of listed share portfolios. We can advise on your personal situation and how the rules apply to your position.
Since this article was initially written, the pandemic has intervened. HMRC relaxed the rules so that no 30 day reporting was required for transactions until after 31 July. It will now be necessary to catch up with deferred filing and to ensure that transactions which complete after 31 July are reported timeously to avoid a penalty being imposed.
The pandemic relief measures also include a stamp duty land tax holiday which is now in effect and we might expect (the Chancellor certainly hopes) for increased property transactions so it is more important than ever to make sure sellers understand their tax positions.
Please come to talk to us as soon as you put a property on the market. You can speak to your usual Mercer & Hole partner or Lisa Spearman.