Landlords at risk of being fined due to little known rule change
Buy-to-let landlords and others who have sold properties to enjoy the recent stamp tax duty holiday face heavy penalties for a little-known rule change, tax experts warned.
Since April, UK residents who sell or gift residential properties in the UK and make a taxable profit are required to report and pay all taxes due on capital gains (CGT) within 30 days of completion of the transaction. Before that, they had up to 22 months to do it. However, tax experts said there was a regular lack of awareness among clients, real estate agents and sellers of goods.
Helen Thornley, technical agent of the Association of Tax Technicians, he said: "We know from experience that when similar rules were introduced for non-residents selling goods in the UK in April 2015, many of them did not learn that they had a report to HM Revenue & Customs at the time of the sale of their properties until their tax returns reached self-dimensioning, so in fact many fines were more than 1,000 pounds. Although some sanctions were later lifted on appeal, this time we cannot expect the same leniency for UK taxpayers, as they could be seen as fewer excuses for not knowing anything about the rules. The late deposit carries an initial penalty of 100 pounds. After three months, there are daily penalties of 10 pounds, up to a max of 900 pounds. After six months, there is an additional fine of 5 percent of the tax due, or £300, depending on the higher amount. After 12 months, an additional fee of 5% or £300 applies, depending on the size of the rate. Meanwhile, for late payments, individuals are fined 5 p. 100 of the unpaid tax in 30 days, six months and 12 months.
Elaine Shiels, a business partner of RSM, a consulting firm, said that while the tax authority had deferred certain taxes due to the pandemic, the CGT's 30-day deadline was "strictly met." He asked hmRC to do more to publicize the changes. Advisers said the rule could catch many people at a time when the housing market is booming, that buyers are rushing to a holiday stamp duty in England and Northern Ireland. Chris Norris, director of policy at the National Association of Residential Owners, asked the tax administration to show mercy.
"While owners should always try to ensure that deadlines such as [the CGT deadline] are met, we expect hmRC to take a sensible approach given the exceptional circumstances resulting from the pandemic," he said, adding that this should also be part of reminding sellers of their responsibilities and creating space for sanctions. HMRC said detailed information on the change rules was published on the gov.uk website in July 2018 and that HMRC organized training and sent information kits to brokers and grant attorneys.
"We want to help all clients get their tax laws and anyone who isn't sure the rules are in place to talk to us," HMRC said. Recommended personal financing The future of rentingin a shrinking economy Only those who have sold a residence that attracts taxable profits, such as leaving buyers and those selling second homes, will be affected. Those who own a property in which they have lived as their primary residence throughout the property are not covered by the rule because they do not have to pay the CGT - a benefit known as private housing relief. But Zena Hanks, who is affiliated with accounting firm Saffery Champness, said people would find it difficult to save themselves if they were exposed to the CGT. Random tenants who had lived on a property prior to rent could mistakenly assume that their sale was fully covered by a private residence facilitation. He suggested that sellers of goods ensure that their property files are up-to-date before they were sold and that they maintain a paper book of costs incurred during the property to calculate their liability. Money spent by denigrators or secondary owners that improve (and do not repair) a property can be used to compensate the CGT.