Capital Gains Tax (CGT)
Reporting within 30 days of sale
The Covid-19 extension for reporting and paying capital gains tax (CGT) due on disposals of UK residential property has ended 31 July. Previously HMRC had advised that no late filing penalty will be charged for any transactions completed between 6 April 2020 and 1 July 2020 which are reported by 31 July 2020.
Any taxable gains will now need to be reported and any tax due paid to HMRC within 30 days of selling the UK property. Interest and penalties will now apply for late returns.
To do this, you will need an online government gateway account or use an agent to complete the return. Information required on the return:
- property address and postcode
- date you got the property
- date you exchanged contracts when you were selling or disposing of the property
- date you stopped being the property’s owner (completion date)
- value of the property when you got it
- value of the property when you sold or disposed of it
- costs of buying, selling or making improvements to the property
- details of any tax reliefs, allowances or exemptions you’re entitled to claim
- property type, if you’re a non-resident
There have also been two other key changes to way in working out your taxable gain when selling a UK residential property.
Exempt last 18 months now 9 months
Previously the last 18 months of ownership of a property that at any point was your primary residence was exempt from any gain; from April 2020 this has now been reduced to the last 9 months of ownership.
Previously any portion of a gain that was attributable to a period where the property was let out was exempt subject to certain limits. From April 2020 this has been restricted to only those periods where both tenant and owner lived in the property at the same time.
Making Tax Digital (MTD)
HMRC have updated their roadmap for MTD with a 5 – 10 year plan for digitalising tax administration.
VAT registered businesses with an annual turnover of £85k or more will already be caught by the rules.
VAT registered businesses with an annual turnover of £85k or less will need to follow the rules by April 2022.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
Undisclosed overseas assets
HMRC has been sending out letters to individuals for whom it holds information suggesting overseas assets are held. HMRC’s aim in sending out these letters is to prompt taxpayers to review their tax returns to check that they are complete and correct and encourage those who need to rectify mistakes to make voluntary disclosures to HMRC.
The July 2020 version of the letters is based on information from tax information exchange agreements with other countries, including as a result of the Common Reporting Standard (CRS).
The letter confirms that HMRC compared the information received under information exchange with the individual’s tax record before sending the letter and that HMRC believes that the individual may not have paid the right amount of UK tax. This statement indicates that the letter is not speculative; HMRC is taking a risk-based approach and only contacting taxpayers where they are unable to reconcile the figures received under information exchange agreements to tax records and tax returns. All the letters include a “certificate of tax position” form which HMRC asks the individual to complete and return whether they have additional tax liabilities to disclose or not.
Self-Employment Income Support Scheme (SEISS)
The applications for the second and final grant under the scheme are now open. The second and final taxable grant is worth 70% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £6,570 in total. The deadline for claiming is 19 October and this cannot be done by an agent.
Stamp Duty Land Tax: temporarily reduced rates
If you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay SDLT on the amount that you pay for the property above £500,000. These rates apply whether you are buying your first home or have owned property before.
The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above for the period 8 July 2020 to 31 March 2021.
|Property or lease premium or transfer value||SDLT rate||if additional property|
|Up to £500,000||Zero||3%|
|The next £425,000 (the portion from £500,001 to £925,000)||5%||8%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%||13%|
|The remaining amount (the portion above £1.5 million)||12%||15%|
For this month’s furlough claims the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
Job Retention Bonus
The government will make a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) for the months of November, December and January. Payments will be made from February 2021.
Temporary VAT rates
The government will temporarily apply a reduced rate of VAT (5%) to certain supplies in the tourism and hospitality sectors. It will come into effect on 15 July 2020 and end on 12 January 2021. Additionally, the following reduced Flat Rate Scheme (FRS) rates will apply:
|Catering services including restaurants and takeaways||4.5%|
|Hotel or accommodation||0%|
The government’s coronavirus job retention scheme (CJRS) was announced on 20 March 2020 and has been hailed as a success in protecting jobs during the pandemic. HMRC has confirmed that some 9.8 million jobs have been furloughed with a cost to date of £33.8bn. According to HMRC, due to the speed with which the rules were introduced, the scheme has become a ‘magnet for fraudsters’.
On 22 July the Finance Act 2020 was given royal assent including substantial enforcement powers to HMRC in combatting potential fraud. HMRC have been given the power to claw back any CJRS payments made to businesses who were not entitled to receive such payments or if the payments were not used to pay employees. HMRC now have full investigative powers, and penalties for any fraud will range from 30% – 100% of the lost revenue to HMRC.
HMRC is encouraging all employers to check their claims and to ensure clear audit trails are kept as evidence. If an employer believes a claim has been made incorrectly, they have 90 days from the later of 22 July or the date of the claim to inform HMRC of the error and make any corrections as necessary.
Every third anniversary of your duties starts date you must put certain staff who have left your pension scheme back into it. This is called re-enrolment.
You only need to assess staff who have left your pension scheme or have reduced their contributions. Any staff who are:
- aged between 22 and state pension age
- and earn over £10,000 a year, or £833 a month, or £192 a week
must be put into your pension scheme and you must both pay into it.
These staff members can once again choose to opt-out or stop their contributions.
Whether you have staff to put back into your scheme or not, you must complete a re-declaration of compliance. You must do this within five months of the third anniversary of your duties start date or staging date. Remember, re-enrolment and re-declaration are your legal duties, and if you don’t act, you could be fined.
Each time you pay your staff, you should carry out the following ongoing duties:
- monitor the age and earnings of your staff to see if you need to put any of them into a pension scheme. You don’t need to do this for staff you have put into your pension scheme and who have chosen to leave the scheme, as you will assess them at your next re-enrolment
- pay money into a pension scheme if you have put staff into it