CAPITAL GAINS TAX – PAYMENTS ON ACCOUNT
Capital Gains Tax Payments on Account are coming from April next year. At the moment, Self Assessment taxpayers have to pay Income Tax payments on account in January and July each year and then maybe a balancing amount in January after the end of the tax year, whereas the payment date for any Capital Gains Tax is 31 January.
The change isn’t going to affect the Income Tax payments, they will stay the same, but the Capital Gains Tax payments will change. Instead of waiting until 31 January after the end of the tax year to pay any Capital Gains Tax, from April 2020 any Capital Gains Tax from the sale of residential property will be payable just 30 days after completion.
Putting the name off to one side – Interim Payment might have been better – the concept is perhaps understandable, I can see why HMRC want to reduce that amount of time between the vendor receiving his sale proceeds and HMRC receiving their tax. Currently the time gap could be as much as 22 months. Compare that 22 months to someone having tax taken from their salary before they receive it then maybe the concept to bring forward the CGT tax payment is difficult to argue against.
How the administration of the new CGT payments will work isn’t clear yet, but I have little doubt that it will involve the filing of an electronic form. All new initiatives from HMRC will now be computer based as slowly but surely the whole UK tax system moves across to the digital system and I expect the online declaration will be very similar to the existing system used by non-resident landlords declaring a sale of a UK property.
HMRC did hold a consultation period before proceeding with the new CGT payment system and most of the points raised in that consultation mentioned the tax calculation itself and the interaction with other disposals and losses which might happen later in the year. These were very valid points and I wish I had taken part in the consultation process, it’s difficult to criticise if you don’t voice your opinion, but some national accountancy firms as well as most of the practicing bodies did take part and, as I say, raised very valid points.
So its coming, assuming nothing happens in the meantime, you can never be sure these days, from April next year you will have 30 days from the date of completion to pay a forecast of your CGT liability on the sale of a residential property. This payment on account, I think I will call them interim payments – I should have taken part in that consultation – can then be revised later to arrive at the final corrected tax liability.
No doubt the details of how the new system will operate are being worked upon, provided workers haven’t been moved across to work on delivering BREXIT, and I shall cover these when they are released. If you have any questions in the meantime please do get in touch using my contact details below:
Robin Stevenson - Tax Partner
Tel: 01825 763 366
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