CG-APP18-240 - Part 2 - Submitting returns through the CGT on UK Property Account: The “Provide details” section of the return submitted through the CGT on UK Property Account
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2.4 The “Provide details” section of the return submitted through the CGT on UK Property Account
2.4.2 Enter sale or disposal details
2.4.3 Enter purchase or acquisition details
2.4 The “Provide details” section of the return submitted through the CGT on UK Property Account
The second set of questions within the return submitted using CGT on UK Property Account enables the user to enter details of the disposal.
This section of the guidance sets out the information required, and what should be entered in different scenarios for UK resident individuals. This is intended as a general guide to the information to provide through the CGT on UK Property Account.
Please note that the order and precise wording of the questions the user will see in the account will depend upon the information entered and selected by the user.
2.4.1 Enter property Address
In the before you start section, the user will have entered how many disposals they are reporting on this return.
The account asks for the address details of one property to be entered into this section.
Where the person is reporting a disposal of residential property, they will have a UK postcode, which can be used to look up the full address. The full address can also be entered manually.
In instances where multiple disposals are being reported, the address that should be provided here should be for the property disposal that resulted in the largest gain or smallest loss. The details, including addresses, of the remaining properties should be uploaded in an attachment, which can be uploaded later in the return in the Report and pay section. Multiple disposals are also considered in section 2.6.1 of this guidance.
People who have disposed of a property that was not solely a residential property may have to consider apportionment of the gain. There is further guidance on this scenario at 2.6.3 of this guidance.
2.4.2 Enter sale or disposal details
The details in this subsection of the return, feed through into the calculation as Disposal amount less disposal costs for the whole property (see 2.2.1). An example of the calculation done by the inbuilt calculator is given in section 2.2 of this guidance.
Some of the disposal details will have already been entered in the “before you start” section.
The following questions are asked in this part of the system. All of these questions require only for the individual’s own share in relation to the property. Where the property is jointly owned, the figures should be apportioned between the owners and only their individual share reported.
How much of the property did the person own?
The user is given the options of 100%, 50% or other share, the latter lets the user enter a percentage manually.
For CGT purposes, it is the share of beneficial ownership which is required, whilst this is often the same as the legal ownership, it can differ. There is further guidance on beneficial ownership at CG70230.
What was the disposal amount?
The exact question posed to the user here will depend on how they indicated they disposed of the property or shares in the first section of the return. The user may be asked how much they sold the property for, how much they got when they sold or disposed of the property or what was the market value of the property when giving it away. Guidance on the disposal amount can be found at CG14480P onwards.
This figure should be the entire amount the person sold the property for, without deducting any costs or fees as there will be an opportunity to enter these later in the return.
However, if the sale was otherwise than a bargain made at arm’s length then the disposal amount should be the market value. If the user only enters the amount they sold the property for and they sold it at under market value to connected person for example, then the calculation of CGT generated by the system will be incorrect. They should enter the market value in order to generate the correct calculation of CGT.
The user should only enter the amount that they got for their share.
Example. Alex owned 25% of a residential property which was disposed of for £400,000. They enter their share of the disposal proceeds which is 25% of £400,000, they enter £100,000.
What were the person’s additional disposal costs?
Additional disposal costs include costs incurred in disposing of the property such as estate agent or solicitor fees. If the person shared these costs, they can only claim their share as agreed with the co-owner(s). Guidance on expenditure can be found at CG15150P onwards.
2.4.3 Enter purchase or acquisition details
This section is to ascertain the allowable deductions to use in the calculation and feeds through to the Acquisition amount, plus improvement and acquisition costs for the whole property part of the calculation (see 2.2.1). Guidance on expenditure can be found at CG15150P onwards.
How did the person acquire the property?
The user is given the options of
- Bought it,
- Inherited it,
- Got it as a gift,
- Other.
The purpose of this question is to inform whether a subsequent question will ask for the amount it was bought for, or the market value of the property at the time it was acquired. If the other option is selected, then the user should provide a description of how the person got the property.
For example, the acquisition may have been by a no gain no loss transfer between spouses or civil partners. In this scenario we’d expect the text entered by the user to describe the situation. The language used does not have to be technical, as long as it conveys detail of how the property was acquired.
Example 1: Mrs X acquired her share of the property that has now been disposed of, from her spouse, there was no CGT liability at the time due to it being a no gain no loss transfer.
She selects the other option and enters something along the lines of “Half of the property was transferred to me from my spouse after we got married” into the box.
Example 2: Mr M acquired his property by purchasing it from a connected person at under market value.
In this instance the option that may seem the most intuitive is to select bought it. If they select bought it, they will be asked for the amount they paid for it though rather than the market value at the time they acquired it. The user should be aware that entering the amount they paid in this instance may produce an incorrect result as the calculation should be based on the market value.
If they select other and enter that they “got the property by purchasing it from a connected person”, they will later be prompted to enter the market value at acquisition, and the correct figure will be used in the system calculation.
What date did the person acquire the property?
This is the date the property was acquired by the person this return is for.
Example: in the previous example, Mrs X’s acquisition date would be the date on which she got the half share from her spouse.
Acquisition amount
The question posed to the user here will depend on how they indicated they acquired the property, and also the date they acquired it on.
If acquired on or before 31 March 1982, then the value requested is the market value on 31 March 1982. The market value at 31 March 1982 is used to work out the gain or loss instead of the actual purchase or acquisition amount, this is called rebasing and further detail can be found at CG16700C.
The person can provide a valuation from a surveyor or their own valuation if they have access to sufficient information. There is guidance on valuations at CG16200. If the ownership of the property was shared, the user should only enter the market value of the person’s share.
The system provides a link to the gov.uk guidance on how to ask HMRC to check a properties market value, https://www.gov.uk/capital-gains-tax/market-value the user should note that this process can take 3 months or more. The user can enter an estimate so that they can report the tax on time. The estimate can be confirmed later through the CGT on UK Property Account or through a Self Assessment Return. For more information on estimates, see the estimates section of this guidance at 2.5.3.
If the property was acquired after 31 March 1982 then the question posed is dependent on how the user indicated that the property was acquired.
They will be asked a variation of either, what was the market value or asked for how much the person paid.
The value entered here will be deducted in the calculation as seen at 2.2.1.
Where the property was acquired in instalments, please see complex scenarios 2.6.4.
Do you want to claim any improvement costs?
If yes, the user is prompted to enter a value for the amount spent on improvements.
As can be seen in the calculation at 2.2.1, this value is deducted in the calculation. Examples of improvement costs, also known as enhancement expenditure, could include amounts spent on adding an extension or replacing a basic kitchen with a luxury one, if the changes are reflected in the state and nature of the property at the time of disposal. However, there are rules governing what can be claimed as enhancement expenditure and further information can be found at CG15180 onwards.
2.4.4 Enter reliefs
The details entered into this section of the return feed into the calculation, see example at 2.2.2 above.
Is the person entitled to claim private residence relief?
If the property has been the person’s main home at some point during their ownership, they might qualify for private residence relief, known as PRR.
The amount of relief available depends on several factors and is explained in more detail both on gov.uk https://www.gov.uk/tax-sell-home and elsewhere in the CG manual at CG64200C.
If the whole of the gain will be relieved by PRR, the person does not need to make a return.
Is the person entitled to lettings relief?
If the person lived in their home at the same time as letting it to tenants, they may qualify for letting relief. Letting relief is explained in more detail on gov.uk Gov.uk guidance on letting relief and in the CG manual at CG64700 onwards.
Does the person want to claim any other CGT reliefs?
This is not where users should enter their personal annual exempt amount (AEA), which is specifically asked for in the next section of the return.
There are other reliefs which may be available, such as relief on compulsory acquisition of land, see CG61900p onwards or Business Asset Disposal Relief, see CG3950p and section 2.6.6 of this guidance.
The user should enter the amount by which the gain is reduced by the other CGT relief so that the in-built calculator displays the correct amount of gain, where possible.
For reliefs that affect the rate of CGT it may be more difficult to enter a single figure here to get the inbuilt calculator to show the correct amount. The example of Business Asset Disposal Relief at section 2.6.6 of this guidance expands on the steps to take in this circumstance.
Rollover relief and gifts holdover relief
Some Capital Gains reliefs such as Gift Hold-over relief or Rollover relief if applicable in full would result in no gain or may only be applicable to part of a gain, leaving a part to be reported through the CGT on UK Property Account. The amount by which the relief reduces the gain should be entered here. Details of how any reliefs operate and any qualifying conditions that may apply to a particular relief are not reproduced in this section of the guidance as it can be found in the HMRC Capital Gains Manual at CG60201c.