Payments on account for residential property sales

Cobhams Tax Consultants Crosby Liverpool Accounts

A payment on account of capital gains tax will need to be made when a residential property is sold from April 2020.

Payment will be due within 30 days of completion and the seller will have to submit a ‘payment on account’ return at the same time.

The changes affect those selling a second home or rental property. They will not apply to disposals covered by only or main residence relief. However, if only some of the gain is covered, a payment on account and return will need to be made for the taxable part.

The changes also apply to overseas property sales. So, a payment on account will need to be calculated when a UK resident sells a residential property abroad. That is unless the gain on the disposal will also be taxed in that country and double taxation relief is available or the gain would be taxed on the remittance basis.

HMRC has published a consultation on how the amount payable will be calculated, the administration of those payments, and changes to the current payment on account system for non-residents who sell UK residential property.

The government is keen to collect capital gains tax as soon possible, and the proposed 30-day payment time-frame would be aligned with the current payment system for stamp duty land tax when a property is acquired.

It would appear that ‘individuals, landlords and investors selling residential properties will need to file multiple returns throughout the year, meaning a further tax compliance burden.

In addition, it will be particularly bad in terms of cash flow for sellers, who will have to pay tax sooner.

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