My client is UK resident and owned a residential property and large garden/grounds. They sold the house and part of the garden a few months ago but retained part of the garden/grounds. The retained part is now to be sold at a loss.
The contract was unconditional before 6 April 2020 but completion wasn’t until after 6 April 2020. Would this be classed as residential and fall within the new 30 day reporting requirements?
The new CGT 30 day reporting requirement applies for residential disposals after 6 April 2020 as stated in FA 2019 schedule 2 paragraph 1(1)b. TCGA 1992 s28 states that for CGT purposes the disposal date is the date in which the contract becomes unconditional, therefore the situation that your client has will not be caught under the new rules as the disposal in question is before 6 April 2020. If their contract was unconditional after 6 April 2020 then it would be caught under the new requirements as the disposal would be after 6 April 2020.
If the disposal had taken place after the 6 April 2020 then the timing for the return is within 30 days from the date of completion as mentioned in FA 2019 schedule 2 paragraph 3(1). This is also the timing for the payment on account as mentioned in FA2019 schedule 2 paragraph 6.
These new requirements do not stop any reporting requirements on the individual’s self-assessment and should be included on there as well.
In regards to your clients garden being classed as residential for the purposes of this schedule we can see in FA 2019 schedule 2 paragraph 17, it refers to TCGA 1992 schedule 1B for the definition of residential property which states ‘For the purposes of this Schedule a person “disposes of residential property” if the person disposes of an interest in land in a case where–(a)the land consisted of or included a dwelling at any time falling on or after the date on which the applicable period begins, (b)the interest in land subsisted for the benefit of land that consisted of or included a dwelling at any time falling on or after that date’. As your client owned a garden that consisted of or included a dwelling at any time, this would be caught under this definition.
The ‘applicable period’ referred to here is the period of ownership which can be found in TCGA 1992 schedule 1B paragraph 2(5).
Also, if your client is making a disposal at a loss then this would not be caught under the new rules as it’s stated in FA 2019 schedule 2 paragraph 1(b) that this schedule applies for the purposes of capital gains tax to direct disposals of UK land on which a residential gain accrues.
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