Capital Gains and Non Residents
As promised the government is changing the rules for capital gains tax (“CGT”) on the sale of UK situated assets owned by non residents.
Up to 5 April 2015, such sales are exempt from CGT. However, from 6 April 2015 disposals of an interest in “UK residential property” will become liable.
We have been informed that residential property will not include communal accommodation, which means residential homes, schools, hospitals etc. It appears, however, that properties in multi residence – for example a house privately let to a group of students - will not be covered.
It is likely that the future will see in depth discussions about the exact meaning of “UK residential property” as owners try to avoid the CGT charge.
This charge, though, may not be as bad as expected as only the gain from 6 April 2015 to the date of disposal will be taxable. This means that properties will need to be valued at 6 April 2015, although there are options to calculate the taxable gain simply as a time apportionment of the whole gain.
One big change is that such disposals must be reported to H M Revenue & Customs within 30 days of completion. If the seller is not within Self Assessment then the CGT due must also be paid within 30 days.
A knock on effect from this change of the rules is the future of the election for a property to be deemed to be your main residence for CGT purposes – which results in being exempt from the charge.
From 6 April 2015 a property can only be nominated as a main residence if:
- It is in the same country as the owner is tax resident OR
- (In the cases where it is not in the same country) the owner spent at least 90 midnights in that property
In the case of UK non tax residents with a home in the UK this second leg is onerous: as soon as you spend 91 midnights in the UK you may well become UK resident for tax purposes –so the CGT saving may be negated by a huge income tax disadvantage.
As can be seen, the new rules are not straightforward and it is important that anyone who may be affected contacts robinson+co’s Tax Partner, Victoria Bishop for further, individual advice on 01900 603623, 01946 692423 or 019467 25808.