Date posted: 1st May 2020
The latest Finance Bill includes important changes to private residence relief that took effect from 6 April 2020.
The first change is to limit to just 9 months the period prior to disposal that counts as a period of deemed occupation and thus exempt from CGT even though the owners are not living in the property during that period
The second is to limit “letting relief” to periods where the taxpayer is in shared occupation with the tenant.
Final period exemption now reduced to 9 months
The final period exemption was for many years the last 36 months which was felt to be too generous. The period was then reduced to the last 18 months and has now been further reduced to the last 9 months.
The final period exemption will remain at 36 months for those with a disability, and those in or moving into care.
CGT Lettings Relief Changes
Lettings relief provided a further exemption for capital gains of up to £40,000 per property owner.
The additional relief was introduced in 1980 to encourage people to let out spare rooms within their property on a casual basis without losing the benefit of PRR, for example where there are a number of lodgers sharing the property with the owner. It no longer applies where property owners rent out their former main residence.
New System for Reporting CGT on Property Disposal Started 6 April 2020
A new CGT reporting and payment on account system was introduced for residential property disposals by UK resident taxpayers from 6 April 2020. The new system as originally announced required the disposal to be reported and any CGT due to be paid on account within 30 days of completion. HMRC have now announced that for disposals between 6 April and 30 June there will be no penalty provided that the return is made by 31 July 2020 although HMRC will still charge interest!
We can of course assist you with this new reporting obligation, but you will need to be registered with the Government Gateway and authorize us to act on your behalf.
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