Capital Gains on UK Residential Property for Non-Residents
6th April 2015 is the start date for a new capital gains tax charge on disposals by non-residents of residential property in the UK. Currently capital gains tax only applies to those who are UK resident. Gains on certain types of communal accommodation, care homes, nursing homes, purpose built student accommodation and residential accommodation for school pupils will remain outside the charge. The charge will not apply to disposals of UK property held by diversely held institutional investors.
The draft legislation has not yet passed into law but it is expected that the property will be re-based to its value as at 6th April 2015 so that only the gain in excess of that value will be subject to the charge. Alternatively, provided that the property is not within the ATED regime, an irrevocable election can be made to time apportion the gain over the period of ownership.
Non-resident companies are able to benefit from indexation and those not within the ATED regime will pay tax at the UK corporation tax rate (20%). Companies within the ATED regime will pay tax at 28% on gains falling within ATED.
Changes to the Main Residence Exemption from Capital Gains Tax
As from 6th April 2015, new restrictions will apply to the availability of the above relief for those non-residents who own UK property or those UK residents owning overseas property. The approach will be to rebase the property to its value at 6th April 2015 so that only the gain arising over that value is subject to the charge. Alternatively, if the disposal is not ATED related, the whole gain may be apportioned over the period of ownership. Another option will be to calculate the gain or loss over the whole period of ownership.
The gain will be reportable within normal self-assessment time limits but if the vendor is not within the self-assessment regime, the gain must be notified to HMRC within 30 days of the conveyance. The tax will also be payable at that time.