We live in challenging times, with frequent changes making life challenging from a tax planning and advice perspective.

We have put together a list of the most common topics, which we speak to clients about, which may be useful to your specific situation.

Capital Gains Tax (CGT) reporting deadline of 30 days for disposals of residential property.

Since 6 April 2020, if you are a UK resident and dispose of UK residential property, you need to pay your Capital Gains Tax (CGT) and submit CGT returns within 30 days of completion of the sale. Before April 2020, you had between either 10 and 22 months to pay CGT. The 30-day deadline is a strict count of days. You must remember to factor in weekends.

Where no CGT is payable, there is nothing to report. Typically, the sale of a house that you have lived in as your home throughout ownership is not reportable.

Depending on income levels, CGT is likely to be payable at a rate of 28%. If you are disposing of a property, you should let us know as soon as possible. Establishing the deductible base cost of a property can take a significant amount of investigative work, so the more time we have, the better. We would also, of course, wish to give you maximum notice of the tax payable, to help with cash flow and funding.

An example of a complicated CGT calculation would be where a cottage is being sold off from a farm. Valuations may be needed of elements of the property not being sold, such as the farm, to apportion cost to the property being sold. Non-UK residents already had to report within 30 days. From 6 April 2019, this was extended to apply to direct and indirect disposals of all UK land (whether or not a gain arises). 

We will be pleased to talk you through the impact of these rules and to calculate the tax payable.

Stamp Duty Land Tax (SDLT) holiday expires 31 March 2021

The Chancellor had announced back in July 2020 a temporary Stamp Duty holiday for properties under £500,000 until 31 March 2021. If you have any thoughts on making property gifts, selling a property, or needing to re-mortgage, you must act urgently to meet the deadline.

Lenders, conveyancing solicitors, surveyors and valuers are all extremely busy due to the 31 March 2021 deadline.

A relatively straightforward gift of property as part of wider tax planning may be caught in this backlog of legal work and take longer than expected. It is important that you make this decision and start the process quickly.

Future changes to Capital Gains Tax (CGT) rates

The Office of Tax Simplification was tasked to look into the current Capital Gains Tax rules and “identify opportunities relating to administrative and technical issues. As well as areas where the present rules can distort behaviour or do not meet their policy intent.” We envisage the work of the OTS having a significant impact on CGT planning for individuals, with implications also for Inheritance Tax planning. The full report is available online and we would encourage you to read this. Rest assured Ellacotts will be monitoring developments and updating our advice to our clients as appropriate.

Possible changes to Inheritance Tax Business Property Relief (BPR)

Inheritance Tax Business Property Relief (BPR) is available on the value of certain business interests once held for two years, at up to 100%. BPR is available so long as the business is trading. Guidance and case law indicates that this trading test requires not less than 50% of business activities to be investment activities. This test is a blunt, pass or fail, test.

It has been recommended to Government that the 50% trading test be toughened to an 80% test. Businesses that can pass the 50% test, but are close to it, and may well fail an 80% test, should consider making use of BPR whilst they can. Appropriate steps you could take include gifts, or moving investment activities to a separate entity.

Ellacotts can help you with your taxes

We carry out periodic reviews of our clients’ tax positions. This is particularly important where there are significant farm diversification projects or rental enterprises. If you would like to discuss your tax position or any advice on your farming business, please get in touch with our expert agricultural team.

Find out more about our services to the agricultural and rural farming community.