Thousands of individuals who have sold second homes in the past 12 months will be unaware that the timeframe to pay any Capital Gains Tax (CGT) has been changed and their legal advisors may also be in the dark, said experts from Scottish accountancy firm Douglas Home & Co.
Sheryl Macaulay, a tax planning specialist at the Borders-headquartered practice, said people who are looking to sell or have already sold part of their property portfolio may find that they are due to pay their CGT bill far quicker than originally anticipated.
“The 30-day payment rule came into play in April 2020 but it has barely been registered outside of the accountancy world and some lawyers are simply unaware of it,” she explained.
“Certainly, most of their clients won’t know a thing about this. Indeed, we suspect that many people who have sold second properties in the past year are blissfully unaware of the mounting penalties coming their way if they did not pay their CGT bill within 30 days.”
Recent research showed that by January 2021 around 50,000 UK property tax returns were filed – with more than a third failing to comply with the 30-day time limit. Those who miss the deadline face penalty payments up to £300 or 5 per cent of any tax due, whichever is greater.
“Even those solicitors who do know about the change will still have problems trying to explain what it means to their clients. That’s before they actually have to wrestle with the complicated process.
“Any failure to report the capital gain within the strict 30-day deadline will see sellers incur penalties. It’s a stressful, costly and bureaucratic burden for law firms – with the possibility of furious clients when they realise they were not pre-warned about this tax hit.
“Perhaps the biggest legal firms, with dedicated tax departments, can take this in their stride. But for the majority of smaller and mid-size property solicitors it is likely to be major headache.”
The tax changes affect the sale of second homes and rental properties by UK residents. They are now obliged to report any estimated CGT liabilities and to make payment within 30 days of disposal of the property.