Think Tank
The office of ‘is it that simple?’ Tax Simplification Changes are afoot. We now have the Office of Tax Simplification (OTS) advising the government on all matters relating to tax, in some cases very relevant to farmers. Details of the OTS review have recently been published, but it’s important to state that, at this stage, these are simply suggestions as a result of the research and review – there is no indication that any of the proposals will become law. Despite this, it does make for interesting reading, and if any of the plans were put into place there could be a significant change to Capital Gains Tax (CGT), main residence and Agricultural Property Relief (APR).
Definite Inheritance Tax (IHT) changes for the farmhouse and residential property This issue is particularly relevant for farmers who are selling a second home, have rental property, farm workers cottages or holiday lets. The payment of CGT on residential property has now been implemented within the Finance Act 2019 and will come into force on 6 April 2020. While most of our attention may be directed towards what is happening with Brexit, it’s important to remember that the payment of CGT on residential property will now be due within 30 days of the date of disposal – much sooner than before. While the Act refers to the date of disposal, this is, for CGT purposes, in most cases the date of exchange of contracts. However, in this case it means 30 days from the date of completion – the date when the monies move between the parties.
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If you are therefore considering disposing of a property, it will be useful to work with your advisers so that a fair assessment of the CGT position can be made. If you are in the selfassessment regime, the gain will still need to be included on your self-assessment tax return. This will enable the actual tax position to be finally concluded, remembering that if you dispose of another asset in the year that produces a loss, it can be deducted from the gain to work out your overall CGT liability. It is useful to note that the payment of CGT is only an interim payment, but even so, the more accurate you can make the payment, the less funds HMRC will be sitting on until the final liability is confirmed. Going forwards, if you are planning any sale of a residential property, it would be a good idea to get in contact with your adviser early, to plan your strategy for making the tax contribution.
Possible IHT changes for main residence and APR A recent publication from the OTS sets out possible changes for a future finance act and IHT treatment. While this is ring-fenced as ‘possible’, it’s worth considering some of the genuine changes being introduced very soon in connection with CGT.
Deemed period of occupation
