Which year end for CGT purposes??

[RedWineLover]

Hi,

I recently sold a commercial property and I am currently trying to figure out which year end my disposal falls in. I understand that the date of disposal is the date which the contracts between the two parties are signed and reporting the disposal and paying CGT is 60 days from completion date.

My queries are:

1. Is the sale memorandum the same as a contract in this scenario, as the property was sold in an auction, there wasn’t a sale and purchase contract signed? The buyer signed the memorandum and I signed the TR1 in March 2023. Completion was after 05 April 2023.

2. If so, would I treat the disposal as being in 22/23 year end, even though the completion date is in 23/24 year end?

Thanks. Any advice would be appreciated.

[Lambs]

R,

Two quick points:

1 You are broadly correct that the disposal date for CGT is the point at which you enter into a binding unconditional contract (or, if you have entered into a "conditional" contract, the point at which those conditions are satisfied).

An auction typically binds you immediately that the bid is accepted - which, again typically, would be the day of the auction itself. So it looks to me like a 2022/23 capital gain.

2 But you are talking about a COMMERCIAL property. Assuming you are resident in the UK for tax purposes, then you do NOT have to make a UK property return within 60 days. A UK resident has to submit and pay that special return only if they have a taxable gain on a RESIDENTIAL property disposal.

However, if you are NOT UK-resident then you have to make a preliminary return (and payment where tax is due) for any disposal of UK land - residential, commercial, gain or loss.

I trust these are useful.

Regards,

Lambs

[RedWineLover]

R,

Two quick points:

1 You are broadly correct that the disposal date for CGT is the point at which you enter into a binding unconditional contract (or, if you have entered into a "conditional" contract, the point at which those conditions are satisfied).

An auction typically binds you immediately that the bid is accepted - which, again typically, would be the day of the auction itself. So it looks to me like a 2022/23 capital gain.

2 But you are talking about a COMMERCIAL property. Assuming you are resident in the UK for tax purposes, then you do NOT have to make a UK property return within 60 days. A UK resident has to submit and pay that special return only if they have a taxable gain on a RESIDENTIAL property disposal.

However, if you are NOT UK-resident then you have to make a preliminary return (and payment where tax is due) for any disposal of UK land - residential, commercial, gain or loss.

I trust these are useful.

Regards,

Lambs

Hi Lambs

Thank you for replying.

I would like to clarify, I am a UK resident and taxpayer and have made a gain on the sale - my understanding is I still need to report the gain and pay the appropriate tax at 10% and 20%, for example. Please can you confirm?

Thanks.

[bd6759]

The gov website isn’t clear, but for UK residents there is a requirement that residential property sits upon the land for new rules to apply.

https://www.legislation.gov.uk/ukpga/2019/1/schedule/2

[Lambs]

R,

If you are UK tax resident and the property is commercial, then you are liable to CGT at 10%/20% (rather than 18%/28%) as you have identified; however this is NOT reportable within 60 days of completion through the special CGT return for residential disposals. It is instead reportable through the "normal" route only, being your 2022/23 tax return.

Perhaps you do not normally make a Self Assessment tax return, and this is the cause of the confusion: I was hoping to reassure you that the special 60-day return was not needed but that does NOT mean that a return isn't needed at all, rather that the only return you will need is the standard annual tax return. The 2022/23 tax return will not be due until 31 January 2024 if filing ELECTRONICALLY, (although there is nothing to prevent you from filing earlier if you prefer) and likewise the Balancing Payment for any CGT that is due for 2022/23.

With regards,

Lambs

[RedWineLover]

R,

If you are UK tax resident and the property is commercial, then you are liable to CGT at 10%/20% (rather than 18%/28%) as you have identified; however this is NOT reportable within 60 days of completion through the special CGT return for residential disposals. It is instead reportable through the "normal" route only, being your 2022/23 tax return.

Perhaps you do not normally make a Self Assessment tax return, and this is the cause of the confusion: I was hoping to reassure you that the special 60-day return was not needed but that does NOT mean that a return isn't needed at all, rather that the only return you will need is the standard annual tax return. The 2022/23 tax return will not be due until 31 January 2024 if filing ELECTRONICALLY, (although there is nothing to prevent you from filing earlier if you prefer) and likewise the Balancing Payment for any CGT that is due for 2022/23.

With regards,

Lambs

Hi Lambs,

Thank you, this is very helpful. I hope you enjoy the rest of your bank holiday weekend!