Draft legislation is about to herald a new era in capital gains tax. The changes – due to come into effect in April 2015 – will have an impact on all non-UK residents who dispose of a residential property located in the UK. Any gains realised by either a sale or a gift will be subject to CGT, regardless of the value of the sale. It’s not just individuals who will be affected by the change. The rule also applies to non-resident companies, partnerships, trustees and personal representatives of deceased non-UK residents. Although institutional investors (non-UK resident pension schemes or foreign real estate investment trusts investing in UK residential property) will be exempt, no reliefs or exemptions are generally available if the property is held for investment purposes, even if it has always been rented out.
What’s more, the charge will apply to properties under construction and being adapted for residential use – including land that forms the garden or grounds of a residential building.
Only gains from 6th April 2015 will be charged. Normally, the property will be rebased to its market value at that date. Time apportionment can, however, be used to calculate the gain after 6th April or the gain and loss can be computed over the whole period of ownership.
Companies with properties already subject to Capital Gains Tax on Enveloped Dwellings (CGTED) for the entire period from 6th April 2015 to the date of sale, will not be subject to the new provisions.
Can Main Residence relief be claimed?
If a nomination is made, it’s possible for Main Residence relief to be granted. The property does, however, have to be located in the same country in which the taxpayer is resident for tax purposes. It’s also essential that the taxpayer spends 90 midnights in the property during the tax year.
Facts and figures at a glance
- The annual exemption amount (£11,000 for 2014/15) is available to non-resident individuals.
- CGT for non-resident individuals will be 18% at basic rate and 28% for higher rate taxpayers.
- Non-resident trusts will pay 28%, while non-resident will be charged at 20% and indexation allowance will be available to take inflation into account.
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