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 April 2015.

Non-UK residents selling UK residential property will be subject to CGT from April 2015 but ‘only to capital gains arising from that date’. This wording would imply that the base cost of properties for CGT purposes will be ‘uplifted’ at that date.

The rate of CGT will be either 18% or 28% for individuals, depending on the level of their total UK income and capital gains. It is intended for the capital gains annual exempt amount (currently £11,000) to also be available to individuals. The rate of tax applying to companies will be 20%, mirroring that for UK resident companies. Companies which are not closely-held will not be caught.

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 confirms 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.

The proposal in the consultation document is that a withholding tax will be applied at the time of sale of the property (similar perhaps to our CG50 procedures). This withholding tax would be collected by solicitors, accountants or property agents. A non-UK resident vendor would have the option to pay the withholding tax or pay the actual CGT within 30 days of the sale of the property, which is the same timescale as for Stamp Duty Land Tax (‘SDLT’) for property purchases.

These new CGT provisions will apply to all UK residential properties, irrespective of their value. In this regard, it is also worth noting that the Annual Tax on Enveloped Dwellings (‘ATED’) currently only applies currently to UK residential properties valued at over £2m. However, this threshold will reduce to £500,000 from April 2016.

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