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Non residents with UK property should seek advice to minimise new CGT charges

By Lesley Stalker on 21 May, 2015

With effect from 6 April 2015, a new capital gains tax charge has been introduced which is aimed at UK non-residents disposing of UK residential property; it specifically applies to non-resident individuals, certain companies and trustees.  We covered this in a recent article.

The amount of capital gains tax payable on disposal of UK residential property is based on the proportion of the gain arising after 5 April 2015, calculated using time apportionment or ‘re-basing’.

If you are non-UK resident and you own UK residential property, it is prudent to obtain a valuation of your property as close to April 2015 as possible, as this will give you flexibility on a future disposal of the property.

Where a capital gains tax charge applies, the rates of tax are the standard rates applying, i.e.

  • Individuals will pay either 18% or 28% depending on their levels of total income and gains in the year;
  • Companies will pay 20% but will also be subject to annual tax on enveloped dwellings (ATED); Read a related article
  • Trustees will pay a standard rate of 28%.

For individuals making a disposal, it may be possible to claim principal private residence relief (PPR) providing the requirements of HMRC’s occupancy test can be satisfied. This requires the owner/co-owner to have occupied the property for a minimum of 90 individual nights and we have blogged about the rules governing the availability of PPR recently.

Alternatively, where a disposal is by a company, ATED charges will apply in preference to these charges. Find out more about ATED in our earlier blogs.

 

What action should you take?

These rules are particularly complex because they interact with the statutory residence test which was introduced with effect from 6 April 2013. Read our detailed overview of the new statutory residence test.

  • You should check your UK residence position in accordance with the statutory residence test;
  • If you are non-UK resident but your spouse is UK resident, you may not be affected by the new CGT rules but should seek professional advice to clarify your position;
  • If you dispose of UK property at a time when you are non-UK resident, you must notify HMRC of the disposal within 30 days of completion. All property disposals must be notified to HMRC irrespective of whether or not a tax liability arises;
  • If you do not file a self assessment on an annual basis, you should pay the tax due within 30 days of completion;
  • If you submit annual self assessments the tax can be paid on your normal due date provided this is approved in advance by HMRC.

Note that any losses made on disposal can be offset against gains made on the disposal of other properties. If you subsequently become resident in the UK, ring-fenced losses from an earlier period of non-UK residence will be available to offset as general losses against other chargeable gains.

Rebasing (whereby the tax payable is based on gains for the period after 6th April 2015) is not available to individuals who purchase UK property whilst they are non-UK resident and subsequently sell the property once they become resident in the UK.

If you are considering a UK property disposal at a time when you are non-UK resident, or you are considering returning to the UK and will wish to dispose of UK property, we recommend you take advice as the correct timing can reduce your liabilities.

If you would like to discuss tax planning in relation to managing a property portfolio, please contact Lesley Stalker by emailing las@rjp.co.uk.

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