Posted by Nick Day on 02 Apr 2015
UK Property Sales: Capital Gains Tax for Non-Residents
From 6 April 2015 the sale of UK residential property by a non-resident expat will potentially be liable to UK capital gains tax.
The new rules will not apply to capital gains relating to periods before 6 April 2015.
Non-resident expat individuals will have three available options in terms of calculating the potential capital gain. These will be a) to re-base the value of the property as at 6 April 2015, so that only the growth in capital value after this date is taxable, b) to “time apportion” the gain so that only the gain relating to the period after 5 April 2015 is taxable and c) to neither re-base nor time apportion, but to calculate the gain/loss under normal principles over the whole period of ownership.
Non-residents will be able to claim the capital gains tax Annual Exemption (current level £11,000 per individual per tax year) against any chargeable gain calculated. The rate of UK capital gains tax payable by non-residents on the sale of UK residential properties from 6 April 2015 onwards will be 18% or 28% depending on the level of the capital gain and other income/gains liable to UK tax for the tax year concerned.
It will be possible for non-resident expats to claim a private main residence relief exemption from 6 April 2015 but in broad terms only if the individual spends at least 90 midnights in the property per UK tax year.
The reporting and payment process has yet to be finalised in full but the sale of the UK property will need to be reported to HM Revenue & Customs within 30 days of the property being conveyed via a Non-Resident CGT (NRCGT) return. Any tax due can be paid as part of the normal UK Self Assessment Tax Return process by 31 January following the end of the tax year. The capital gain will need to be reported on the normal Self Assessment Tax Return and on the NRCGT return.
The New Charge for Capital Gains Tax
The new charge is separate to the Annual Tax on Enveloped Dwellings (ATED) rules which can also apply a capital gains tax charge to the sale of UK residential properties owned by non-natural persons such as companies.
Under current rules, if someone leaves the UK to work in full-time employment abroad as a non-resident expat and returns to the UK and re-occupies the former main residence, no capital gains tax will be due on the eventual disposal of the property.
Under the new rules, someone who leaves the UK to work in full-time employment abroad as a non-resident expat and who sells the property whilst non-resident would be liable to a possible charge unless broadly they or their spouse can continue to occupy the UK property for 90 days per tax year during the period of non-residence.
This would be particularly difficult for the employee working abroad as one condition for them to continue to be regarded as non-resident is that they must be present in the UK for fewer than 91 days per tax year! There is lobbying activity afoot to try and make the case for relaxing the rules for this category of individual.
There are also questions of basic fairness, as a non-resident expat who owns a UK investment property and is planning on returning to the UK will have the option of selling the property before resuming UK tax residence and therefore be in a better position than UK residents to whom the April 2015 market valuation re-basing rule etc. will not be available.
Capital Gains Tax Advice for Non-Residents
All non-residents who own UK residential property are strongly urged to obtain April 2015 valuations in case the best option for them turns out to be the April 2015 market value re-basing of the cost.
Circumstances will be different in each individual case but if you need assistance in establishing your UK tax residence position under the Statutory Residence Test (SRT) and/or in understanding these new capital gains tax rules please get in touch with us.
If you would like any advice regarding the above article 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 email email@example.com.
- Property Partnership Incorporation and SDLT
- Top 10 Expat Tax Tips for Individuals Moving to the UK
- Tax Relief For Residential Mortgages
- Overseas Pension Changes 6 April 2017
- Tax on PPI payments