A new capital gains tax (CGT) regime in the UK came into effect at the start of the 2015/16 tax year – in other words from the 6th of April, 2015.
The changes will affect you if you are not a resident of the UK for tax purposes and are selling a residential property in the UK.
Key points are as follows:
- A UK Capital Gain Tax calculation will need to be prepared. This computation will usually have reference to the property’s market value as at the 6th of April, 2015. However, taxpayers are given the option to time apportion the whole gain over the period of ownership (ie with reference to the period before the 6th of April, 2015, and after that date), or to calculate the gain (or loss) over the whole period of ownership of the property.
- Non UK resident individuals (and trustees) are given the same CGT Annual Exemption as is available to UK residents. For tax year 2018/19 this is £11,700 for individuals and £5,850 for trustees.
- Capital gains tax is payable by individuals at the rate of 18% or 28% upon the sale of a residential property in the UK. The rate will depend on the level of the individual’s other income that is taxable in the UK in the tax year during which the disposal occurs, and the amount of the capital gain.
- Principal Private Residence (PPR) relief continues to be available. This relief exempts a capital gain from the charge to tax. However to access PPR relief you will need to be tax resident in the same country as the property for the tax year in which the disposal occurs, or you will have to meet a new “90 day rule”. To meet the “90 day rule” you must have spent at least 90 midnights in the property in the tax year for which the PPR relief is claimed.
- This means that non UK resident individuals who spend 90 nights a year or more in the UK will still be able to sell their property free of UK CGT. However – and importantly – such individuals should exercise care if intending to rely on this provision, as spending this number of days in a UK residence may trigger UK residence for tax purposes generally.
- More specifically, individuals wanting to rely on the 90 day rule should have reference to the UK’s Statutory Residence Test, under which an individual’s UK tax residency status is considered based on the time spent in the UK as well as a “sufficient ties” test (one of which is a 90 days test).
- The occupancy test does not apply for any year that a spouse or civil partner is UK resident. PRR applies for that year in the normal way in that relief is given to the extent that the property is the taxpayer’s only or main residence.
- Taxpayers must report the disposal of the property on a Non Resident Capital Gains Tax (NRCGT) return within 30 days of the day after the date the property sale is completed.
- If the taxpayer is already within the UK’s SA system, s/he will need to report the disposal on a NRCGT return within 30 days, with payment of tax arising to be made as part of the normal end of year tax payment to HM Revenue.
- Individuals who are not in the SA system are required to pay any capital gains tax due to HM Revenue within 30 days of the sale completing.
- Reporting via the NRCGT return and payments to HM Revenue are to be done electronically.
Importantly, all disposals have to be reported to HM Revenue on a NRCGT return within 30 days of the sale completing, whether or not there is a tax liability.
The late lodgment of a NRCGT return can be expected to trigger an obligation to pay a late filing penalty – by each non-UK resident owner of a jointly owned residential property in the UK.
If you are selling a residential property in the UK – or are planning to do so – we recommend that you also consider whether there is any capital gains tax payable in the country in which you are a resident.
bdh Tax is experienced in dealings with capital gains tax planning in the UK, and in Australia.
If you would like to discuss your situation with us please complete the enquiry form on this webpage, or telephone the bdh Tax office that is closest to you.
We will be pleased to have an initial free discussion about your situation, how we might help, and our fees if you decide to instruct us.
We look forward to hearing from you.