Changes to Capital Gains Tax affecting residential property owners who are non-UK resident.

On 5th April 2015, the rules relating to Capital Gains Tax changed. These changes will affect you if you are currently non-UK resident and you own residential property in the UK.

If that’s you – then you need to take action now. Failing to do so could mean you end up paying more tax if you dispose of your property. Until 5 April 2015, non-UK residents could potentially dispose of UK assets without incurring a charge to capital gains tax liability. However, from 6 April 2015, a charge to Capital Gains Tax will arise on non-UK residents, (including trustees, certain companies and personal representatives as well as individuals), who dispose of UK residential property.

The charge will only be applicable to gains accruing after 6 April 2015. To help clarify this, a UK residential property purchased in 2005 by a non-UK resident for £150,000, is valued at 6 April 2015 at £300,000 and it is sold in June 2015 for £310,000. For a UK resident, the gain arising would be calculated as the difference between the sale proceeds of £310,000 and the original cost of £150,000. However, under this new rule introduced for non-UK residents, the gain will be the difference between the sale proceeds and the value of the property as at 6 April 2015.

Therefore a non-UK resident should consider obtaining a valuation of their UK residential property, even if they have no plans to sell. If you don’t get a valuation now, then an alternative, when you dispose of the property, would be to apportion the total gain over the whole period of ownership. However, this could result in a significant gain arising where there has been a dramatic increase in the property value since the start of ownership.

A non-UK resident could also attempt to obtain a retrospective valuation, but this will be altogether more complex, time-consuming and costly. A Non-Resident Capital Gains Tax (NRCGT) return will be required to be filed with HM Revenue and Customs within 30 days of completion on disposal of the property. If the non-UK resident does not have an “established relationship” with HM Revenue and Customs, that is they do not need to complete and file a UK tax return, then the NRCGT return will also need to contain an assessment of the tax due and this tax will also need to be paid within 30 days of completion on disposal of the property.

Where there is an “established relationship”, the assessment of tax will be contained in the tax return that is to be submitted to HMRC for the year in which the disposal was made. The tax due would then be payable by the usual due date.

It is likely that HMRC will penalise those who do not make a disclosure – even when there is no tax due. It’s important therefore for those non-UK residents with relatively straightforward tax affairs who do not usually correspond with HM Revenue and Customs (e.g. a retired pensioner) to be aware of the requirements for notifying them of a disposal of a UK residential property. In conclusion, it is highly advisable to obtain a valuation of the property as soon as possible in order to avoid guess work in the future, or costly valuation fees.

Contact us for further details:

Phone: 020 7354 3914

The content of this document is intended for general guidance only and, where relevant, represents our understanding of current law and HM Revenue and Customs practice. Action should not be taken without seeking professional advice. No responsibility for loss by any person acting or refraining from action as a result of the material in this document can be accepted and we cannot assume legal liability for any errors or omissions this document may contain. © Cheesmans. Apr 2015. All rights reserved.
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