CGT for non residents

HMRC have published the results of their consultation on implementing a capital gains tax (CGT) charge on non-residents from April 2015, which aims to align the tax treatment of UK and non-residents who make gains on UK property sat Harris & Co accountants Northampton who as charterd accountants often see this type of transaction

The report outlines the design and delivery features of the extended CGT charge following feedback received from a range of organisations and individuals, including industry bodies, property professionals, tax specialists and lawyers.

It has been decided that the extended CGT charge will apply to disposals of UK residential property by non-resident individuals, non-resident trustees, personal representatives of a non-resident deceased person and some non-resident companies disposing of UK residential property. There will be no change to the tax treatment of disposals of trading stock and communal residential property will generally be excluded from the charge.

To ensure that all disposals of UK residential property made by diversely held institutional investors will not be subject to the charge, a ‘narrowly controlled company test’ will be introduced which will work alongside a ‘genuine diversity of ownership test’. This was set out in an update statement to the consultation made on 31 July 2014.

The rate of tax for non-resident individuals will be the same as the CGT rates for UK individuals, currently 18% or 28% depending on the person’s total UK income and chargeable gains for the tax year. Non-resident individuals will have access to the annual exempt amount of taxable gains, in line with UK residents, and may be eligible for private residence relief (PRR).

With regard to possible changes to PRR and the ability to elect a person’s residence for relief as an only or main residence, the Government has decided to introduce a new rule to restrict access to PRR for properties located in a jurisdiction in which the individual is not tax resident. This rule will apply to both non-residents disposing of UK residential properties and UK residents disposing of residential properties located outside the UK.

The rate for companies will mirror the UK corporate tax rate, currently 20%, and non-resident companies will have access to a limited indexation allowance and group companies will have the ability to enter into ‘pooling’ arrangements. To prevent potential double taxation, where part of the gain could be subject to both annual tax on enveloped dwellings (ATED) related CGT and the new CGT charge the ATED-related CGT charge will take precedence.