Posted by Tax Innovations on 14 Jan 2019
Non-Resident CGT – April 2019 Changes
From 6 April 2019 the scope of UK CGT on non-residents is being extended to include all UK real estate property as well as to assets deriving at least 75% of their value from UK land. In addition, the reporting and payment of CGT is changing for all UK residential property disposals from 6 April 2020.
UK CGT (Capital Gains Tax) is a territorial tax – UK tax residents are subject to UK CGT on their worldwide assets, whereas non-UK tax residents are currently only subject to UK CGT on UK residential property, and then only on the gain that has arisen since 6 April 2015.
From 6 April 2019 the scope of UK CGT is again being broadened for non-UK tax residents to include:
- Disposals of all real estate located in the UK, not just residential property.
- Disposals of assets (such as companies) deriving at least 75% of their value from UK land (“UK property-rich entities”) where the vendor has had a substantial interest (25% or more) at any time in the 2 years before the sale.
There is an exclusion for UK property-rich entities where all (or almost all) of the property has been used for trading purposes. In addition, HMRC will only be able to apply UK CGT to the disposal of UK property-rich entities if the tax treaty with the vendor’s country of residence gives taxing rights to the UK for this type of disposal – currently not all UK tax treaties include this clause, so we would expect a gradual replacement of all those treaties which do not give such taxing rights to the country where real estate is located.
Rebasing rules retain the April 2015 revaluation provisions for UK residential property, whilst providing revaluation to April 2019 for commercial property and UK property-rich entities. This ensures that only the gains on the properties arising after the relevant dates are charged to CGT.
Non-resident CGT disposals already need to be reported to HMRC within 30 days of the date of disposal. The CGT also needs to be paid by this date. This is the basis that will apply to all chargeable disposals by non-UK tax residents from 6 April 2019.
There is currently an exemption from payment at the 30 day point where the vendor is already in the UK self-assessment system and they claim to pay through their normal self-assessment tax return. This option to delay payment will be withdrawn from 6 April 2020 because on this date all disposals of UK residential property, including disposals by UK tax residents, will be brought within this system. Such disposals will need to be reported to HMRC and a payment on account made for the CGT due, within 30 days of the date of completion of the disposal.
The changes to the UK CGT system make up a third of the current Finance Bill, as they are being introduced through a complete rewrite of a significant portion of the CGT legislation. This article only sets out the changes to the overall scope of CGT.
If you would like any advice regarding the April changes to non-resident CGT or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or firstname.lastname@example.org
- Property Partnership Incorporation and SDLT
- Non-Resident Landlords – UK Tax Update
- Non-Resident CGT – April 2019 Changes
- Overseas Pension Changes 6 April 2017
- Top 10 Expat Tax Tips for Individuals Moving to the UK