Since April 2020, you have been required to pay any tax due on disposals of land or property within 30 days of completion. But can you defer the payment until later?

Faster payment

It’s no secret that the government is looking to bring payments of tax closer to the time that taxable amounts are received. The recent “Tax Day” announcements confirmed that this is on the medium-term horizon for income tax and corporation tax. For capital gains tax (CGT) it has already started. Since 6 April 2020, you have been required to make a special return and payment of tax where you make a disposal of UK land or property and the resulting gain isn’t covered by an exemption, i.e. there is CGT to pay.

Pro advice. The 30-day deadline is measured from the date of completion, not the date of exchange.

Coronavirus. As a result of the pandemic, it has been widely reported that property sales are taking longer to complete. Consequently, the stamp duty land tax holiday that was due to end on 31 March 2021 was extended to 30 June 2021. However, there is also a little-known exception to the 30-day filing and payment requirement that could help you exchange contracts to sell property before 6 April 2021 but experienced delays in completing.

Exception. The exception is contained in Sch. 2 (5) Finance Act 2019 . In simple terms, a 30-day return is not required if the deadline for it falls after the date that you delivered your ordinary tax return for the year, taking account of the disposal.

Example. Mike exchanged contracts to sell a rental property on 1 March 2021. The sale is completed on 1 May. There is a taxable gain after the annual exemption of £20,000. Mike must report this and pay the CGT by 31 May 2021. However, if he submits his 2020/21 tax return with details of the disposal on or before 31 May, he doesn’t need to make the special property CGT or payment. The tax is then deferred until 31 January 2022.

Pro advice. This will only be an option if it is possible to submit the tax return for the year of disposal, so only relevant for individuals that have exchanged on or before 5 April 2021. This is because the date of exchange is the date that determines the CGT disposal year.

Where individuals have exchanged contracts to sell on or before 5 April 2021, they can defer the capital gains tax payment until 31 January 2022 if they complete their tax return for 2020/21 within 30 days of completion.

The next step

Tax day announcements

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.