HMRC Checks on UK Property Disposals and 60-Day Returns

Since the rules introduced by Schedule 2 to the Finance Act 2019 took effect, most UK residents disposing of UK residential property with a chargeable gain must report the disposal and pay an estimate of the Capital Gains Tax due within a short, fixed period of completion, rather than waiting until the normal Self Assessment deadline. This is a separate online return from the annual Self Assessment return.

The obligation applies whether or not the seller already files Self Assessment returns for other reasons, and it applies to gifts of property as well as sales, where the gift gives rise to a chargeable gain, subject to the normal reliefs such as gifts to a spouse or civil partner.

Where Private Residence Relief covers the whole gain because the property was your only or main residence throughout your period of ownership, with no chargeable element left over, no 60-day return is generally required for that disposal. The relief needs to genuinely cover the full gain, not just apply in part.

Complications arise where part of the property was let out, used for business, or where periods of absence, a large garden or grounds, or a period as a second home reduce the relief available. In these mixed cases, a partial gain can remain chargeable and reportable even though the property was, for much of its ownership, a main residence.

HMRC receives Land Registry data recording property transfers, including sale price and completion date, and compares this against 60-day returns and Self Assessment filings. A sale that appears in Land Registry data with no matching return, or a return that appears to understate the likely gain based on purchase and sale prices, is a common trigger for a compliance check letter.

These checks are largely automated in their initial trigger, meaning a letter does not necessarily indicate suspicion of deliberate wrongdoing; many result from an overlooked 60-day filing obligation or a genuine calculation difference, such as unclaimed allowable costs.

Missing the 60-day deadline can result in penalties calculated on a similar structure to other late-filing penalties, with an initial penalty and further penalties the longer the return remains outstanding, plus interest running on any unpaid tax from the original due date regardless of when the return is eventually filed.

Because interest accrues from completion, not from when the taxpayer becomes aware of the obligation, sellers who discover a missed filing months later should still calculate and pay the tax as quickly as possible to stop interest accumulating further, rather than waiting for the point to be raised formally by HMRC.

The 60-day return is based on an estimate using the information reasonably available at the time, which may not yet reflect the full picture for the tax year, particularly where other gains, losses or income affect the applicable rate. The subsequent Self Assessment return reconciles the position, with credit given for tax already paid.

Where the estimate on the 60-day return later proves too low, for example because a subsequent disposal used capital losses that were not yet known about, the Self Assessment return should reflect the final, correct calculation, and any underpayment settled through the normal Self Assessment payment process.

If you sold or gifted a UK residential property with a chargeable gain and have not filed a 60-day return, the priority is to establish the correct figures and file as soon as possible, since penalties and interest generally increase the longer the return remains outstanding, but do not increase because of an earlier failure to notice the obligation existed.

Where the sale happened some time ago and Self Assessment returns for the relevant year have also not addressed the gain, both the outstanding 60-day obligation and the Self Assessment position need correcting together, with a consistent calculation across both filings.