Capital Gains Tax changes affect UK residential property

Tue 24 Feb 2015

Jo White
Tax Consultant, Spofforths 

Changes to Capital Gains Tax come into force from April 6th this year, which will newly affect non-UK resident owners of UK residential property.

Historically, UK Capital Gains Tax has not been payable on UK property where the owner was resident outside the UK for tax purposes. However, Autumn 2013 saw the announcement that non-UK resident owners of UK residential property would become subject to UK Capital Gains Tax on any gain realised and draft legislation published in December 2014 presented the exact nature of this charge.

Tax charges were introduced to company and other non-natural persons who owned high value residential property in 2013 and with effect from 6 April 2015, a Capital Gains Tax charge will be placed on individuals and Trustees living outside the UK when they sell residential property in the UK. It will also apply to non-resident companies which are held by five or fewer participators.

The gain on the asset will be calculated based on the difference between the sales price and the market value of the property as at 6 April 2015 or if the property is purchased after this date, using the acquisition cost.

The gain will only be taxable to the extent that it was used as a dwelling for this period and as with UK-resident individuals, it will be possible for main residence relief to be claimed by the non-UK resident owners.

However, claims will be restricted where the owner was considered non-UK resident for tax purposes for a particular period of ownership and they failed to meet the ‘day count’ test (more than 90 days occupying that property).

Where tax is payable in both the UK and the country the individual or company is resident, then it should be possible to offset the UK tax against any other tax borne. However, advice should be sought here to ensure that this is possible.

The new legislation is set to come in from 6 April 2015 so sales of UK property by non-UK resident individuals may not apply if the property is sold before this time. Properties immediately sold after this time are likely to see a gain, albeit small.

This is a fairly fundamental change to Capital Gains Tax and one that many non-UK residents may not be aware of. It is important that 6 April 2015 valuations of properties concerned are obtained as this will form evidence of any tax charge being calculated.

Find out more information about selling a property.