Fine Winter 2019

Significant changes to capital gains
tax for UK resident tax payers
on the disposal of UK residential
property have been announced. They
take effect from 6 April 2020 and will
have a substantial impact for:
• The payment date for capital
gains tax
• Reducing the final period for main
residence exemption
• Restricting lettings relief
In a small compromise, two extra
statutory concessions will become law.
30 Day Payment for Residential
Property Gains
From 6 April 2020, UK residents will be
required to pay tax on UK residential
property gains within 30 days of
completion. Alongside making payment,
a tax return will generally have to be
submitted to HMRC within the same
timeframe. Helpfully, no tax return will be
required for no gain / no loss disposals,
nor for disposals where no tax is due.
The tax return is only for the capital
gains tax computation for the asset
disposed of. That might seem
reasonable at first blush, but if the tax
payer has capital losses on the disposal
of other assets, they will not be taken
into account. The tax payment will
therefore be a payment on account of
the total capital gains tax liability for
the tax year with a further payment or
refund due on submission of the Self
Assessment tax return.
The introduction of this tax return is an
additional obligation in the sales process.
Currently, a return for Stamp Duty
Land Tax is required within 14 days of
completion, and is usually completed by
the lawyers dealing with the conveyance.
It is likely that early advice from your
tax advisor will be necessary to get a
full grasp of the intricacies of the capital
gains tax computation, particularly
where only partial main residence
exemption is available.
Final Exempt Period for Main Residence
Exemption
If a property has been the owner’s only
or main residence throughout the entire
period of ownership, then the capital gain
arising is wholly exempt from capital gains
tax. If however there is more than one
property used as a residence, there is
the possibility that the property disposed
of may not qualify for main residence
exemption if another property has been
nominated as the one to be regarded as
the main residence.
When nominations are involved, quite
often only part of the period of ownership
will qualify for the exemption, although in
all cases where the property qualifies in
part for the exemption, the final period of
ownership will be deemed to be occupied
as the main residence in any event and will
therefore qualify for exemption in respect
of this final period of ownership.
This final period of ownership has been
18 months since 6 April 2014. From 6 April
2020, the final exempt period will in most
cases be further reduced to 9 months
only. For disabled persons and those living
in care homes, the final exempt period will
continue to be three years after 6 April
2020, which was the position existing for
all tax payers prior to 6 April 2014.
Restriction of Letting Relief
In addition to the main residence
exemption, there was a further relief,
known as “letting relief” which home
owners often claimed when selling a
property which had been their main
residence but which they had vacated
and let to tenants. Letting relief was up
to £40,000 per individual, and therefore
for a couple could be up to £80,000.
In addition, the letting relief could be
available on multiple properties, if they
had each qualified for the main residence
exemption. From 6 April 2020, whilst
letting relief continues at £40,000, it will
only apply to those who share occupancy
with the tenant. It is expected that this
will significantly reduce the number
of disposals to which lettings relief is
available.
Late Nominations
The first concession to be legislated
relates to late nominations specifying
which of two of more residences are to
be treated as the main one qualifying for
the main residence exemption. Normally,
a period of two years from the date on
which more than one residence is available
is allowed for making the nomination.
Delay in Commencing Occupation
The second concession to be legislated
concerns delays in taking up occupation
of a main residence. Normally, the main
residence exemption only accrues from
the date occupation commences. If the
property has not been the residence
of another individual between the
date of acquisition and the taking up
of occupation, then that period will be
From 6 April 2020, whilst
letting relief continues
at £40,000, it will only
apply to those who share
occupancy with the tenant.
a period of deemed occupation if the
property is subject to building works
(for up to 24 months), or the individual is
disposing of their previous or only or main
residence (for up to 12 months).
Planning Points
There are a number of planning points:
• On almost any analysis, if a sale of
a property is contemplated, then it
should be completed before 6 April
2020.
• The sale of a buy to let property
which has previously been a main
residence is most likely to be affected
by at least one of these changes.
• You will need to plan ahead to ensure
that the capital gains tax computation
can be prepared in time to meet the
new 30 day deadline for filing the tax
return and payment of the capital
gains tax following a sale.
Whilst representations have been
submitted to HMRC in response to these
changes by the accountancy and taxation
bodies, it is expected that legislation
enacting these changes will come into
force on 6 April 2020, although it is
possible that some amendments to the
current draft legislation may be made.
Summary
The government’s focus on extracting
capital gains tax from residential
properties is now firmly on UK resident
taxpayers. For the multiple residential
property owner, these changes will have a
significant impact and professional advice
is most likely to be needed.
Stuart Ritchie is a chartered accountant
and chartered tax adviser with over 30
years’ experience having specialised
in private client taxation and in helping
individuals and their families all his
career. He is a tax partner with Ritchie
Philips LLP based in Horsham and can be
contacted on 020 3195 1300 or at
stuart.ritchie@ritchiephillips.co.uk
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