UK CGT changes for non-UK residents on residential property

In 2014, the UK Government published a consultation document on extending CGT to non-UK residents from 6 April 2015. The recent UK Finance Bill (No 2) 2015 legislates for this change.

Non-UK residents selling UK residential property will be subject to CGT from 6 April 2015 but only to capital gains arising from that date. In effect, the base cost of properties will be “rebased” for CGT purposes to their market value at 6 April 2015 so that UK CGT will only apply to the gain realised over this “rebased” value in the event of a future disposal.

The rate of CGT will be either 18% or 28% for individuals, depending on the level of their total UK income and capital gains. The capital gains annual exempt amount (£11,100 for 2015/16) will also be available to individuals.

The rate of tax applying to non UK resident companies will be 20%, mirroring that for UK resident companies. However, if you are a company within the charge to the Annual Tax on Enveloped Dwellings (ATED) which applies to UK residential properties valued at over £500,000 (from April 2016), the rate will be 28% on some or all of the gain. This is a complex area and specific tax advice should be obtained to clarify the interaction of the ATED and CGT provisions.

The new CGT will apply to a property used or suitable for use as a dwelling i.e. a place that currently is, or has the potential to be, used as a residence. The consultation document confirmed that Principal Private Residence (‘PPR’) relief could be available to certain non-UK resident individuals. However, this relief would have limited application given that a non-UK resident individual’s main residence is typically located outside of the UK.

Any non-UK resident individual or company who makes a disposal of UK residential property after 6 April 2015 will need to submit a tax return, known as a “NRCGT” return to HMRC within 30 days of the completion date.

Unless you are required to file a UK personal tax return, corporation tax return or an ATED return for the property concerned, you will also need to calculated and pay the tax due within 30 days. Otherwise, the payment of tax due on the disposal will be made by the normal due dates for the UK tax year in question. For individuals, this is the 31 January following the UK personal tax year and for companies 9 months after their financial year end.

In conclusion, if you are a non-UK resident that owns a UK residential property you should obtain a property valuation at April 2015.