Private Client BlogCapital Gains Tax (CGT) liability on disposal of residential property by non-UK resident individuals
From the 6 April 2015 non-UK resident persons became liable to pay Capital Gains Tax (CGT) on any profit they make from the sale of the whole or part of a residential property owned in the United Kingdom. The rate of Capital Gains Tax is as it is for UK resident persons, at either 18% or 28% as determined by the total amount of UK income and chargeable gains a person has in the tax year. In addition, non-resident individuals also have access to the same annual allowance for CGT as UK resident persons, being £11,100 in the current tax year 2015/16.
A perhaps onerous element to the new legislation is that unless the non-resident individual registers with HM Revenue & Customs to complete and submit Self Assessment tax returns, the CGT on the net gain must be paid within 30 days of conclusion of the contract for sale. If the non-resident person registers for self assessment, then the 30 day payment rule does not apply.
As applicable to UK resident persons, who are not liable to pay CGT on the sale of their only or main residence, as it is their Principal Private Residence (PPR) the non-resident individual can enter into an election to make their UK residential property their PPR only when they have spent at least 90 nights in the property, in the same year.
It is perhaps more welcome news that the valuation of the property can be rebased as at 6th April 2015, and so any CGT payable shall only take into account gains realised after the 6th April 2015.
Depending on the circumstances it may give a more favourable result if (1) the gain is time apportioned; calculated over the whole period in which the property has been owned by the non-resident individual or (2) to simply calculate the gain without rebasing the value as at 6th April 2015.
Non-resident clients should therefore be strongly encouraged to keep accurate records and to seek advice when looking to dispose of a UK residential property, in order to achieve the most favourable outcome.
If you have any queries regarding this matter or of any other matters in respect of Capital Gains Tax, Inheritance Tax or succession planning please contact Caroline Stephen, firstname.lastname@example.org or any of the members of our Private Client team.